Like many textile exporters, Pakistan is worried about losing market share to China when a decades-old import quota system expires at the end of the year.
It also will face stiff competition from countries in Latin America and Africa that already have preferential tariff access to the US clothing and textile markets.
Pakistan made a similar request for textile trade benefits in the aftermath of the September 11, 2001 attacks on the United States.
In exchange for its help in the US war in Afghanistan, Islamabad asked Washington to remove quotas on its textile exports to the United States. US textile producers protested, and the White House turned down the request.
Pakistan will be able to compete with China in many textile sectors after quotas expire, but "I think in the garment sector we'll be under very heavy pressure," Khan said.
A one percent increase in access to the US market would double Pakistan's exports and create hundreds of thousands of new jobs, he said.
"Europe is far more appreciative of this situation than the United States. We have had preferential tariffs from Europe since 2001, right after 9/11," Khan said.
US producers have objected to unilaterally cutting textile and clothing tariffs, partly on the grounds that many developing countries also have high textile duties.
Khan said Pakistan gladly would cut its textile tariffs in exchange for preferential access to the United States.
"We are quite prepared to give reciprocity," he said.
Speaking at a dinner meeting hosted by the Progressive Policy Institute at a local hotel Commerce Minister Humayun Akhtar Khan said Pakistan-US trade relations were growing fast and would become vibrant and mutually advantageous.
"The current high-level bilateral talks under way under the Trade and Investment Framework Agreement (Tifa) of June 25, 2003, were progressing well and would be a step forward."
He said, talks with the US Trade Representative Ambassador Robert Zoellick and the Commerce Secretary Donald L. Evans have been "highly encouraging".
The Bilateral Investment Treaty (BIT), he stated, was being presently negotiated and hoped it would lead to lowering of tariffs on trade from Pakistan, and US policy of preferences would take care of Pakistani traders interests and also lead to more investments in Pakistan by upcoming US investors.
At the outset, the commerce minister detailed the ongoing economic reforms in Pakistan which, he added, had started to give dividends.
The national economy, he stated, is up and running and its turnaround has given a new air of confidence.
In Pakistan, he said, trade is totally deregulated.
With the United States, he said, Pakistan's trade would take major strides provided proposals under consideration now are accepted and enforced.
He hoped that the next round of bilateral trade talks would yield to moving towards considering and arriving at the Free Trade Agreement (FTA)
The minister said the ongoing economic reforms package is based on national consensus between all political forces of Pakistan.
The Musharraf government, he stated, has set the stage for national economy getting on tracks again, and was now going ahead on sound footing.
He referred to record $12 billion national reserves, low inflation rate, low deficit.
"Our national economy is doing well and investors are making money."
In the textile sector, he said, the government has made huge investments in anticipation of the January 2005, when under WTO, restrictions on trade will go.
MARKET ACCESS: Addressing at a seminar on 'Economic Challenges Facing Pakistan: The Role Of The United States', here on Thursday State Bank Governor Dr Ishrat Husain said Pakistan needs market access for its exports, lowering of barriers against trade, flows of foreign direct investment, transfer of technology, easy movement of labour and active collaboration in scientific education, research and development.
The seminar was held under the aegis of the Centre for Strategic and International Studies (CSIS).
He said Pakistan would benefit a lot if, for example, the United States "allows our textiles and clothing to enter the US markets" on the same terms and conditions as given to Mexico, Central America, Caribbean and Sub-Saharan Africa.
"This single gesture alone," the SBP Governor said, would generate hundreds of thousands new jobs in the economy, boost Pakistan's foreign exchange earnings substantially and escalate the economic growth to new horizons. He said that Pakistan would prefer to have greater access to US market compared to increased aid allocation."
He mentioned four US states where, he said, the textile firms "are to be hard hit" by the new agreement on clothing and textiles - effective January 2005.
Dr Ishrat said that if there were 'strategic alliances' or 'joint ventures' - marketing partnerships or technical agreements - between US and Pakistani firms, the threat of jobs of the size of 600,000 in these four states ie North Carolina, South Carolina, Georgia and Alabama, could be saved by up to 60 percent. On the other hand, these could generate more job opportunities for Pakistani skilled persons and help alleviate poverty.
"As the latter produce goods at low costs compared to their counterparts in the US, the specifications, designs, marketing, quality control, research and development can be assigned to the US firms, while production can take place in Pakistan. The machinery in the US can be shipped to Pakistan in lieu of equity in the joint ventures." In this process, he stated, the American consumers would buy clothing at lower prices and some of the American workers would be able to save their jobs and Pakistan would expand output, exports, and employment and reduce poverty.
"This is a win-win situation for both countries and does not involve US tax payer's money that goes into aid," the SBP Governor added.
He said that Pakistan has opened up its economy as it allows 100 percent foreign direct investment in all sectors. "Tariffs are low and non-tariff barriers have been removed. There are no restrictions or prior approval on the repatriation of capital, profits, dividends, remittances, royalties and technical fees."
He said that financial sector is healthy and robust and it is owned and managed mainly by the private sector. Pakistani banks make financing available--both long-term and short-term--to foreign companies on same terms as to local companies.
Pakistan, he said, is a country with a 30 million strong middle class enjoying per capita incomes (in purchasing power) of $8,000-$10,000 is an attractive market for US investors.
"The rates of return on equity and assets are much higher than what they can obtain elsewhere. There hasn't been any single case of expropriation of foreign investment in the entire history of Pakistan. Skilled and educated labour force is available at low wages."
He said that the legal system which is essentially based on the British system is predictable, although slow.
Thus, American firms locating their investments in Pakistan, either as the platform for exports to third countries or exploiting the vast domestic market, would be most welcome.
He said that Pakistan has decided to access international capital markets for meeting its external financing needs. Private equity and debt funds, hedge funds, pension funds, mutual funds and other investors can earn an above-average return by investing in Pakistani paper while being assured of safety and liquidity of their investment.
In reply to a question on what has been achieved during the last five years, he said that the initial period was devoted by the economic team of the new government to managing the crisis and making sure that the country avoided default. A comprehensive programme of reform was designed, and implemented with vigour and pursued in earnest, to put the economy on the path of recovery and revival. The IMF and World Bank were invited to enter into negotiations on new standby and structural adjustment programmes.
He said that although the canvas of reforms in Pakistan was vast, and corrective action was required on a number of fronts, there was a conscious effort to focus on achieving macroeconomic stability, on certain key priority structural reforms and on improving economic governance.
The structural reforms included privatisation, financial sector restructuring, trade liberalisation, increasing pace towards deregulation of the economy and generally moving towards a market-led economic regime.
Keeping this in mind, he said, one could ask what were the outcomes of the economic reforms undertaken during the past five years. He enlisted macroeconomic stability, structural reforms--privatisation, deregulation and liberalisation--tax reforms and economic governance.
Stating that Pakistan was no longer interested in reliance on loans from international lending agencies, Dr Ishrat expressed confidence, saying that "Pakistan will be able to exploit its future rapidly." He said, "We have decided not to go to WB and IMF but for social uplift project assistance."
He, however, added that Pakistan would need bilateral assistance, such as that from the United States. "But", he said, "our peculiar stress is to demand market access, lowering of barriers. We want transfer of technology, research and development, etc."
In this respect, he said, "the US has a role to play". Sub-contracting of production, he said, would mean lower prices to the advantage of the consumer.
On the other hand, he said, giving improved market access would generate economic activity in Pakistan, and lower poverty. Such gesture would not involve adoption of appropriation by the US Congress. "It will be a win-win situation for both"--Pakistan and the United States.
In Pakistan, he said, over 600 multinationals are undertaking their operations, majority of them being from United States, and all of these are making good profits.
Earlier, Ambassador Teresita C. Schaffer, Director for South Asia, CSIS, introduced the guest speaker.