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Cotton imports spiked 2,249 percent year-on-year in September and 456 percent year-on-year for the first quarter of FY21, an increase of $170 million to the import bill compared to the same period of the previous fiscal. This increase in imports is likely due to the surge in demand for Pakistani textile products as reported recently but also due to seven percent decline in domestic cotton production. As more than 85 percent of cotton unfinished goods imported into Pakistan were in the form of raw cotton, the imports of raw cotton have a significant implication on textile trade in Pakistan.

Although, local conditions in demand and supply of cotton have influenced the import pattern, it is imperative to understand the changing dynamics of cotton imports as the diplomatic relationship between Pakistan and India worsened in 2019. Borrowing data from ITC’s Trademap.org, it can be observed that India became an important source of raw cotton for Pakistan after 2005 as the relationship between the two countries improved. It replaced the United States as the largest source in 2007. Apart from a small blip in 2009 due to the straining of ties after the Mumbai attacks in 2008, India remained a dominant supplier of raw cotton to Pakistan.

But in 2019, Pakistan imported just $55 million worth of raw cotton from India which was slightly less than the amount imported from Afghanistan. Pakistan has historically been reliant on either Indian or US origin raw cotton. Even though the share of imports from the United States has drastically increased since 2016, Pakistan is now importing a larger value from relatively newer trading partners such as Mexico and Argentina. The varieties of raw cotton also differ across regions and can have implications on the quality of output produced. Could it be that the trading restrictions between Pakistan and India are forcing Pakistani textile producers reliant on imported varieties to seek newer trading relationships and tap into more distant markets? What implications will this have on the consequent textile and apparel exports?

Bangladesh is a powerhouse in exporting textile products. Its rise in prominence is more exemplary given that it has little domestic production of raw cotton and relies heavily on imports. A comparison with Bangladesh’s import of raw cotton shows that it is dependent primarily on Indian raw cotton. However, it too is diversifying with Brazil, Benin and Ivory Coast becoming important suppliers of raw cotton. In an industry where small margins in import values per unit matter significantly to an exporter, the competitive prices offered by other sources of raw cotton can be critical for Bangladeshi exporters.

In essence, as the demand for imported raw cotton increases in Pakistan, it will have to tap into different sources of raw cotton. Western African countries such as Benin, Ivory Coast and Burkina Faso are becoming important sources of raw cotton. Interestingly, Pakistan’s own exports of raw cotton have decreased from $373 million in 2012 to $22 million in 2019. Pakistan has been overly reliant on natural cotton for its production of downstream products. Further, it is important to state that Pakistan is heavily dependent on natural cotton as input for downstream textile products, while the global trend suggests a preference for artificial and synthetic inputs. Can this changing trend in the imports imply an opportunity to shift the ratio of natural cotton and artificial material towards one that is in line with the global trend? The textile producers and the relevant policymakers must take advantage of the changing dynamics if the exports of textile products from Pakistan is to have a favorable outcome.