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Farah Stockman

Trade vs. aid: Pakistan wants lower tariffs, but US gives money instead

Pakistani-made clothes were on display in India. Pakistan is one of the largest producers of textiles.

Tsering Topgyal/Associated Press

Clothes from Pakistan, one of the largest producers of textiles, were on display in India.

In those first dark days after the Sept. 11, 2001, attacks, the Bush administration sent a message to Pakistan: You are either with us or against us. Turn against the Taliban and join us in this war. Or else.

Pakistan’s leader, General Pervez Musharraf, agreed. But he asked for something in return. Sure, he wanted money. Sure, he wanted weapons. But the most important thing he wanted didn’t have to do with either of those. It had to do with fabric.

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The textile and clothing industry is the backbone of Pakistan’s economy, accounting for 60 percent of exports and 20 percent of employment. In factories across Pakistan, bearded men bend over sewing machines, while women in headscarves transform mountains of shirts into neatly folded packages for shipment abroad.

But Pakistan has struggled under heavy competition from countries with better infrastructure (India and China); countries so poor they get preferences (Bangladesh); and countries that have free trade agreements with the United States.

So when 9/11 happened, Pakistan saw a chance to finally get what it wanted from America: lower tariffs. But more than a decade later, it’s still waiting.

US officials initially agreed to try to lower tariffs back in 2002. But when Musharraf visited the White House that year, George W. Bush explained that he faced too much opposition from lawmakers from North and South Carolina — home to some of the last American textile factories.

Even though textile and apparel jobs in the United States have dwindled to less than half a million (from 2.4 million in the 1970s) the lobby still holds sway in Congress.

“It’s not about the number of constituents they have today who are working in factories,” Scott Quesenberry, a former Bush trade official, told me. “It’s about the millions voters out there who, years ago, were working in factories and lost their jobs.”

So Bush couldn’t lower tariffs for Pakistan. Instead, he promised more military aid.

“It was a very major disappointment,” recalled Abdul Razak Dawood, Pakistan’s minister of commerce at the time.

But Pakistani officials did not give up. They continued to ask for lower tariffs.

When Bush visited Pakistan in 2006, his aides devised a plan they thought would satisfy everyone: Pakistan would get duty-free access to the US market, but only for certain items and only if they were produced in the remote, lawless areas near the Afghan border.

When Bush announced the so-called “Reconstruction Opportunity Zones,” they were supposed to be a bulwark against rising militancy and a favor to one of America’s key allies in the war on terror. But squabbling over which products would be duty-free dragged on endlessly. The US textile lobby wanted as short a list as possible; the US retailer lobby fought for just the opposite.

The biggest battle was over denim jeans, one of Pakistan’s most lucrative exports. Retailers argued that tens of thousands of jobs could be created in the tribal areas by making jeans duty-free. Move over, Al Qaeda. Here comes Old Navy.

But the US textile lobbyinsisted the deal threatened American jobs. Some US factories, especially in Texas, still make denim jeans.

Finally, lawmakers agreed on a list. But by this time, the bill had been so watered down that even Pakistani businessmen complained bitterly about it. Who was going to build a factory in the tribal areas — where guys know more about machine guns than sewing machines — when you can’t make duty-free jeans?

So Congress couldn’t lower tariffs for Pakistan. It gave a massive aid package instead. While the textile trade bill floundered, a 10-year, $7.5 billion economic assistance bill, sponsored by John Kerry, soared through Congress without opposition.

Thanks to that bill, USAID has spent millions on small-scale job-creation projects in Pakistan: Teaching 200 youths to weave on traditional looms. Helping 1,500 farmers grow better mangos. Giving 22 trout farmers eggs to restock their fish.

But the number of jobs created by these small, far-flung efforts is minuscule compared to what would happen if the United States just lowered tariffs. No wonder there are conspiracy theories in Pakistan about how the United States wants to keep them dependent.

In recent years, relations have been at an all-time low. Calls abound in Congress for cutting off aid. But many Pakistanis say they didn’t want aid in the first place. What they wanted was lower tariffs.

“It makes no sense,” Kiran Chaudhry, of Resham Textile Industries, told me during my last trip to Lahore. “The thing that will have the biggest impact doesn’t cost anything at all.”

Farah Stockman can be reached at fstockman@globe.com. Follow her on Twitter @fstockman.
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