Statement by Ambassador Michael Punke, U.S. Permanent Representative to the WTO, at the Trade Policy Review of Pakistan
March 24, 2015
*For the Record*
Thank you, Chair. On behalf of the United States, we are pleased to participate in Pakistan’s fourth Trade Policy Review. Our Government would like to thank the WTO Secretariat and the Pakistan Government for their informative reports provided to Members prior to this meeting. These reports provide an excellent opportunity to understand the current macroeconomic challenges in Pakistan and the structure and substance of Pakistan’s trade policy regime. We have submitted questions to the Pakistani delegation; we look forward to receiving answers to these questions and to continuing the dialogue with our partners in Pakistan.
The United States views Pakistan as an important partner – not just on trade issues but also on issues of global importance such as combating terrorism. We are committed to this partnership and the trade relationship between our two countries. The overwhelming success of the March 2015 U.S.-Pakistan Economic Partnership Week, featuring the visit of the U.S. Secretary of Commerce Penny Pritzker to Islamabad, is a recent example of this commitment.
We appreciate that this TPR covers a period of time when Pakistan has needed to dedicate significant resources to address security concerns and respond to natural disasters, at times diverting resources from its economic development. My comments today, therefore, are offered in the spirit of constructive engagement with full recognition of Pakistan’s challenge of keeping its population safe while addressing the reforms needed to increase trade and investment while also respecting WTO rules.
The United States commends Pakistan for its first-ever transfer of power of democratically-elected governments in 2013 and recognizes the impact of political stability on economic performance. As observed by the Secretariat, the subsequent passage of the 18th amendment rebalances powers between government branches and federal and provincial entities. While we recognize that devolution brings opportunities for improved local governance, we urge provincial officials to respect trade-related commitments taken at the federal level and refrain from imposing additional barriers to trade.
The United States echoes the comments of the Secretariat by acknowledging the resiliency of the Pakistani economy. The country has experienced steady economic growth – GDP growth has accelerated each year for the past four -- and gradually improving macroeconomic stability. This growth and stability are in large part due to well-grounded economic policymaking and adherence to IMF-prescribed reforms. We recognize Pakistan’s strong performance in the sixth quarterly review of its IMF program and encourage Pakistan to keep pressing forward with economic reforms that make Pakistan a more attractive trade and investment partner. Yet fiscal gaps and tax collection shortfalls remain. We concur with the Secretariat’s concern regarding the prevalence of statutory regulatory orders (SROs) and their deleterious effect on fiscal accounts. We welcome the government of Pakistan’s efforts to begin phasing out SROs and look forward to continued progress on eliminating SROs that had established special rates and non-tariff trade barriers in some 4,000 product areas.
Bilateral trade between the United States and Pakistan, while healthy by any measure, still shows room for expansion. In 2008, our bilateral trade in goods was $5.5 billion. During the period covered by this report, that balance has slightly decreased to $5.2 billion for 2014. U.S. imports from Pakistan were $3.6 billion in 2008 and grew to $3.7 billion in 2014. U.S. exports to Pakistan were $1.9 billion in 2008 and fell 20 percent, to $1.5 billion, in 2014.
During the period under review, the United States has been the largest direct investor in the Pakistani economy, with over $2.2 billion invested from FY 2008/2009 to FY 2013/2014. As the Secretariat notes, however, overall foreign direct investment (FDI) into the Pakistani market has been tepid, with FDI as a percentage of GDP falling from 3.2 percent in 2008 to 0.6 percent in 2013. This disappointing result can be attributed to energy shortages, security concerns, and the bureaucratic hurdles to doing business in Pakistan. Current and potential U.S. investors have also expressed concerns regarding government intervention in pharmaceutical pricing. We urge the Pakistan government to introduce FDI-friendly policies on setting pharmaceutical prices. Both foreign investors and our stakeholders have stressed the need for Pakistan to further strengthen its protection and enforcement of intellectual property rights, including through improvements in its administrative and judicial capacity as well as increase transparency in IP decision making, which would help Pakistan attract investment in key sectors. To aid in Pakistan’s efforts to improve its intellectual property system, the United States has implemented numerous capacity building programs.
Despite these issues, we view Pakistan as a positive long-term bet. In addition to the stabilizing macroeconomic policy mentioned above, the government of Pakistan has implemented recent measures that will boost trade and investment going forward. We congratulate Pakistan for the successful April 2014 auction of 3G and 4G spectrum bands and the approval of the LNG terminal at Port Karachi. These measures will contribute to an improved operating environment for businesses in Pakistan, large and small.
The United States welcomes Pakistan’s continued support and commitment to the WTO’s work and to trade liberalization through the rules-based multilateral trading system. We would like to congratulate you on the WTO Committee on Government Procurement’s decision to accept Pakistan’s request for Observer Status at their meeting in February. We are encouraged by your government's demonstration of high-level political will in this area, and stand ready to work with you as you consider accession to the Agreement on Government Procurement. We were also pleased that Pakistan recently notified the WTO Secretariat of Pakistan’s Category A commitments for the Trade Facilitation Agreement. We hope that Pakistan will also submit its acceptance of the Trade Facilitation Agreement as soon as possible and would welcome an update from Pakistan regarding its anticipated timing for doing so. We recognize Pakistan’s active and constructive participation in the negotiations on non-agricultural market access, rules, trade facilitation, agriculture and services. This constructive role was one important element that led to success at Bali.
Pakistan has faced and continues to face many challenges, but nonetheless has made great strides in undertaking economic reform. My Government urges Pakistan to remain steadfast in its pursuit of the policies necessary to achieve your country’s economic goals. The United States appreciates the opportunity to participate in this TPR and the work that Pakistan has undertaken to ensure a meaningful dialogue. We look forward to continuing to work with Pakistan in the future inside and outside the WTO. In closing, on behalf of the United States, I would like to wish Pakistan a peaceful and prosperous 2015.