‘Trust deficit is a huge constraint in US-Pakistan relations’

December 8, 2019

Interview with Michael Kugelman, Deputy Director of the Asia Program and Senior Associate for South Asia at the Woodrow Wilson Center in Washington DC

The News on Sunday (TNS): There has been a mixed reaction from Pakistan to Ambassador Alice Wells’ statement on the China-Pakistan Economic Corridor (CPEC) on November 21 at the Wilson Center in Washington DC. Some say it might be an offer to improve trade relations between the United States and Pakistan. Do you agree?

Michael Kugelman (MK): I don’t think it’s about trade relations. The US and Pakistan are already trading at relatively robust levels, with the two sides having set a record last year for their bilateral trade volume. But despite this trade progress, I don’t think Washington is ready to commit the requisite policy space to expanded trade and investment until it sees more progress in the two areas it considers most important: Pakistan’s cooperation in the peace process in Afghanistan, and Pakistan’s ability to take complete and irreversible steps to crack down on terrorism.

Wells’ speech, in my view, was meant to call out Beijing for the sustainable growth model it applies in its Belt and Road Initiative projects, and to argue that Washington’s model can be more beneficial for Pakistan and its neighbours.

TNS: Pakistan’s Minister for Planning Asad Umar recently said that CPEC is not against any country, and Pakistan will not be a party to anyone on this issue. He also welcomed American investments in Pakistan. Your comments?

MK: Both Beijing and Islamabad have consistently said that other countries are welcome to join the project. There have also been reports in recent years that a variety of countries — from Turkey to Iran and many in between — would join up in some way, though the details have never been clear about this. The best path to internationalise CPEC may lie in contributions from the private sector instead of national governments. Already, there have been some contributions from American companies, including General Electric.

If China and Pakistan want others to get involved with CPEC, one useful gesture could be to rename CPEC — perhaps removing both “China” and “Pakistan” from the project name — to convey the idea that CPEC is or should be seen as an inclusive initiative.

TNS: Chinese Ambassador to Pakistan, Yao Jing, responding to Ambassador Alice Wells’ criticism to CPEC, commented that the US did not help Pakistan in resolving its electricity crisis. How would you respond?

MK: No one — including Beijing or Islamabad — has resolved Pakistan’s electricity crisis. So it’s not fair for the Chinese ambassador to level this criticism, even though it is perfectly accurate. At the same time, for all we hear about the new energy projects associated with CPEC, there was a recent period — especially during the height of the Kerry-Lugar-Berman bill era — when the US expanded civilian assistance to Pakistan and when Washington made major efforts to boost energy security in Pakistan. At any rate, resolving Pakistan’s energy crisis will require more than putting more electricity on the grid. It will require fixing very complex demand-side problems, like circular debt and transmission and distribution losses. And let’s be clear: CPEC is not the silver bullet that can fix those entrenched problems.

TNS: As you said in your opening remarks at the Ambassador Alice Wells’ presentation on the China-Pakistan Economic Corridor (CPEC) in Washington DC on November 21, America is not popular in Pakistan, where most people think the American administration only supports Pakistan when they need the country and abandons it when they accomplish their goals. Do you think the trust deficit is the main issue between good US-Pakistan relations?

MK: The US and Pakistan are two countries with many divergent interests — from approaches to terrorism and preferred endgames in Afghanistan to views about India. I would also argue that China is a big constraint for US-Pakistan relations. I don’t see how Washington can ever develop a broad and strategic partnership with a nation that is closely allied with America’s top strategic rival — a country that the Trump administration views not only as a strategic competitor but also as a national security threat.

TNS: According to Ambassador Wells, China is lending over $5 trillion worldwide, but it lacks transparency, and as a result, world institutions are unable to monitor financial transactions. Criticising the CPEC project in Pakistan, she also said China is not transferring technology to local areas, and it is not helping the Pakistani youth in employment opportunities. What’s your viewpoint?

Beijing has benefited from working with many governments, not just Pakistan’s, that so value Chinese largesse that they are willing to shrug off these problems for the greater goal of securing Chinese loans and infrastructural support, among other benefits.

MK: Yes, I agree with these critiques, and these are concerns that have been voiced many times previously, including by those in Pakistan that support the CPEC. This is also not unique to Pakistan. Beijing’s investment models around the world entail a lot of opacity, very little technology transfer, and the use of Chinese labour. There are many case studies to be found if one looks, for example, at China’s large-scale agricultural investments in sub-Saharan Africa. Beijing has benefited from working with many governments, not just Pakistan’s, that so value Chinese largesse that they are willing to shrug off these problems for the greater goal of securing Chinese loans and infrastructural support, among other benefits.

TNS: How would you compare the Chinese strategies of building mega projects in developing countries by lending with the American model of sustainable development, which is market-driven and transparent in developing countries?

MK: This was the very comparison — or should I say contrast — that Ambassador Wells was trying to make in her speech. The way she describes it, the US model is much better because it brings real benefits to host countries and doesn’t ensnare them in debt traps. Of course, the US model is certainly not problem-free. But for me, the main problem with this comparison is that there’s not enough evidence on the ground, especially in Asia, to prove that this US-model-is-better argument is true. If we look across South and Central Asia, China’s footprint is everywhere, and it has poured billions of dollars into all types of projects. What the US has done simply cannot compare. Certainly, the US has provided assistance to Pakistan, and it backs the TAPI pipeline project. It also intends to scale up infrastructure support to some of the smaller South Asian countries as part of its Indo-Pacific strategy. But at this point, the US simply is not as present as China in the region.

TNS: For some observers, close US ties with India have also pushed Pakistan towards China. Do you think the India factor is highly relevant to Pakistan’s strategic relations with China?

MK: Certainly, a shared concern about India is what brings Pakistan and China together, just as a shared concern about China is what brings the US and India together. But it’s important to look at these different relationships with some nuance. The four sides of the US-India-China-Pakistan square are not as clear and strong as they may seem.

First off, the US-India relationship has its problems, particularly on the commercial side. Additionally, Washington and New Delhi continue to struggle to agree on what is meant by strategic partnership. Meanwhile, the India-China relationship, while strained, is a complicated rivalry that does entail a fair amount of cooperation in bilateral trade and international diplomacy (they work together in forums such as the AIIB and the Shanghai Cooperation Organization, for example). Finally, for all the talk of being iron brothers, the China-Pakistan partnership has its tension points; Beijing, for example, would prefer that Islamabad crackdown more convincingly against all terror groups on its soil.

The writer is a consultant on media strategies and South Asian affairs in Washington DC. He has worked for several American universities as assistant dean and faculty.

Pakistan-US ties and CPEC: Michael Kugelman calls trust deficit a huge constraint