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Pakistan and China Discuss New Economic Corridor; India Protests

On February 18, Pakistan President Mamnoon Hussain visited China for the purpose of discussing the opening of a controversial economic corridor between the two nations, traversing Pakistan-occupied Kashmir territory.

Hussain’s visit marks the second meeting of the Joint Cooperation Committee of the Economic Corridor. Over the course of his four-day stay, Hussain will conference with Chinese President Xi Jinping and Premier Li Keqiang.

The purport of the corridor is to connect China’s Xinjiang province with Pakistan’s Gwadar port, opening up road access to both the Indian Ocean and the Arabian Sea. The multimillion dollar project has stoked controversy in India, given its own proprietary claims on the region. A spokesperson for the Chinese Foreign Ministry, Hua Chunying, acknowledged the tension between India and Pakistan on this score. She said, “On India’s concerns, I understand it is about the Kashmir issue. China’s position on this issue is clear cut. The Kashmir issue is a legacy issue from history.We hope the two sides (India and Pakistan) will follow the spirit of peace, appropriately deal with (the issue through) dialogue and consultation.”

Still riding high from the news that it was granted duty free access to European markets under the Generalized System of Preference Plus (GSP), effective January 1, 2014, Pakistan is on the hunt for new trade partnerships. And feeling shunned by the U.S., it has recruited more regional collaborations to take advantage of the new opportunities GSP status brings.

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For example, the Russian government has been investing heavily in Pakistan’s energy sector, helping it deal with business-stymieing shortages. Russia’s assistance in this regard has gained it some diplomatic traction with Pakistan since its chronic energy shortages continue to undermine manufacturing across the nation, especially in Punjab, where many of the captive power plants are expected to be deprived of natural gas for the duration of the winter season. And more than 50 percent of the factories in Faisalabad have been shut down due to electricity shortages. Last month, Yuri Kozlov, head of the office of the Trade Representative of the Russian Federation, recently toured the Faisalabad Chamber of Commerce and Industry in Pakistan, and spoke hopefully about the opportunities for trade between the two nations, especially regarding their garment industries.

Winning GSP Plus status with the E.U. is a historic victory for Pakistan, one that is widely expected to have an enormous impact on its textile sector. Currently, the E.U. is Pakistan’s primary destination for its textile exports. Overall, Pakistan’s textile exports topped $13.06 billion last fiscal year, including $2.7 billion worth of yarn and $2.5 billion of fabric to Bangladesh, specifically. Pakistan’s exports have grown by approximately 12.5% per year, with a growth of 10.3% to the E.U., in particular. The textile industry accounts for more than 50 percent of the nation’s total exports. While forecasts regarding the full reverberations of the new status for Pakistan vary widely, many predict growth by as much as 100 percent over the next four years.

Thirteen textile products are included on the list of those than can be exported duty-free to the twenty-seven members of the E.U., accountable for $231 million worth of goods last year. Some are predicting this will increase Pakistan’s exports to the E.U. by $1 billion.

Nevertheless, Pakistan has felt stung by the U.S.’s resistance to granting it comparable preferential status. Repeatedly, Sheikh Ilyas Mehmood, chairman of the Pakistan Textiles Exporters Association (PTEA), has urged the U.S. to consider a free trade agreement with the South Asian nation. The U.S. has spurned its advances, leaving tensions in the wake of recent trade discussions. The U.S. is Pakistan’s biggest trading partner, importing nearly $4 billion worth of its goods per year, including textiles. Mehmood believes that number could quickly rise as high as $6 billion if Pakistan has increased access to U.S. markets as well as the friendly transfer of some technologies.

Hua emphasized the significance of the economic corridor to both nations. She said, “May be you have known, the vision of the economic corridor is a very important agreement between the two leaders.” She also anticipated that the project was the first step in a developing trade relationship between China and Pakistan. “It’s also likely to become a new highlight of bilateral cooperation. It not only benefits our two countries but also enhances connectivity between South Asia and East Asia.”