The United States’ plan for establishing war-zone factories in Pakistan’s tribal areas along the border with Afghanistan now looks most unlikely to be pursued during the present Barack Obama administration.
United States trade officials in Washington told a visiting Pakistani delegation headed by Commerce Secretary Zafar Mahmood last month that the US had no intention to move any legislation that would help to establish Reconstruction Opportunity Zones (ROZs), which were meant to guarantee the duty-free import of local produce into the US market, according to Asia Times Online. The ROZs concept was developed to give duty-free access to products from designated parts of the border region between Afghanistan and Pakistan in a bid to create new industries and jobs in the longtime Taliban stronghold as they rebuild from fighting. Then-president George W Bush promised six years ago to help set up ROZs in the border areas, but the measure has been bottled up in the US Congress.
The ROZ legislation raised the concern of US textile makers and unions that it could lead to job cuts in the US. Critics say the ROZs could be used as a place to warehouse, label or package textile goods made in the industrialized Pakistani cities of Faisalabad and Karachi. They also contend that the ROZs could lead to transshipment from China, particularly since customs officials would be effectively unable to monitor the trade from that region. Scrapping the ROZs deal has disappointed the Pakistani business community, which was hoping for increased market access to the US and a boost to overall exports. Local analysts believe the US offered ROZs as an economic “carrot” to Pakistan and has used it as a politically more feasible tool for benefiting trade compared with any reduction in duty as an immediate market access initiative. ROZs were planned to be set up in the whole of Khyber Pakhtunkhwa province (formerly Northwest Frontier Province) and in Azad Jammu and Kashmir (Pakistan-administered Kashmir) which borders India. A bill to establish the ROZs was proposed 2009 by Democratic lawmakers Senator Maria Cantwell of Washington and Representative Chris Van Hollen of Maryland, but it has languished ever since amid feuding over labor standards and duty-free provisions.
The Pakistani business community had high hopes on progress after what appeared a commitment by the Obama administration to early realization of the ROZ trade program. United States retailers and clothing importers favor the ROZs program for Pakistan, while American manufacturers and unions say US retailers would take advantage of the duty savings and the 35 US cents an hour labor costs in Pakistan, putting at stake workers’ jobs in the US. Goods produced in ROZs would be exported to the US at zero tariffs. As a result of a free-trade agreement signed in 2006, the Pakistan-China Investment Co (PCIC) is working as a window of the China Development Bank for evaluation of joint ventures between the two countries. The Chinese would not miss an opportunity to invest directly in the ROZs or through PCIC. Pakistan’s exports textile products worth US$3 billion a year to the US, where the total textile market is worth as much as $110 billion. The country’s share in the American market could grow to $10 billion in a short time if Washington allows it duty-free market access. Pakistani officials argue that a reduction in import duty on textiles would not cost US jobs, but would increase Pakistan’s share of US textile imports to 0.5% from 0.2% by giving it a competitive edge over competitors like India, Bangladesh and Vietnam.
The idea of setting up ROZs came when a US consulting firm issued an assessment report during the George W Bush administration. The study emphasized the need to combat unemployment of young educated males and reduce poverty in the tribal areas. A lack of economic development in the areas resulted in turning them into a base for extremists.
