Trade with China

The potential of the China-Pakistan Economic Corridor continues to be talked up – but the question of how Pakistan can make the most of it remains up for debate. Even in critical reports on CPEC, there are substantive questions that continue to remain unanswered. Earlier this week, a study launched by UNDP Pakistan and the Ministry of Planning claimed Pakistan must connect underdeveloped regions in the country to the corridor to double trade with China. The logic is that even if Pakistan is able to cater to one percent of China’s trade, it would be $45 billion. The trouble is that it is not necessary that any gross increase in trade would necessarily be better for Pakistan. More connectively for undeveloped regions could be at their disadvantage if trade flows one way – from China to Pakistan. The only way it can be a shared relationship is if the Pakistani government is able to create a market for Pakistani goods in China, a near impossible endeavour that it has not even concerned itself with. Trade between the two countries remains in favour of China, and there is no sense of any planning from the government of how it will try to reverse this equation.

Under such circumstances, could CPEC really develop remote regions in Pakistan? For one, yes – if the proposal to build ancillary roads is fulfilled, connectivity would improve. However, it could also end up producing out migration. A much more developed agenda of reform is needed, one that goes much beyond infrastructure in order to bring about such a transformation. The UNDP report states that the Pakistani government has failed to counteract how market flows increase regional disparity. Addressing this is an issue that the government seems to not be aware of. Minister for Planning Ahsan Iqbal continues to make bold promises of Pakistan joining the list of richer countries by 2030 but all of this will depend on the direction in which trade flows. The promise of small-scale industry and value-added sector investments is, for now, a pipedream. The report has identified areas of investment for the Pakistan state in case it does intend to look into getting benefit from CPEC. Much of the proposals though remain limited to service industries for CPEC-related activities. This is not enough for equitable development under the CPEC formula. With a new Free Trade Agreement with China set to be signed next month, there is still time for the government to take a more holistic and long-term picture before making any decision.