Achieving $1 billion potential

The challenges in increasing Pakistan’s exports to China by $1 billion this year were discussed earlier in this space. While in the medium to long, focusing on promoting exports of domestic manufacturing is the best way forward, there are other ways to boost exports to reduce the CAD in the short run.

China has a huge demand for soybean meal to feed to their livestock industry with Brazil and US being the primary suppliers. About $40 billion soybeans were imported in 2017 of which US’s share was $14 billion. The trade war has led to China imposing 25 percent tariffs on soya bean imports from US and turning to South America to fill their requirements.

However, South America alone cannot fill this big a shortfall which is why Brazil, the world’s top soya bean exporter, is purchasing from US to feed its domestic processors as it diverts more of its own crops to China at premium prices. This is why China has lifted the embargo of soya beans import from a number of countries including India, but not Pakistan.

GMO exports to China require a license and US’s soya beans are genetically modified. As explained in a recent interview Westbury’s CEO Abdul Rasheed Jan Muhammad, three institutions are involved in obtaining the license for exports. The Ministry of Food Security that makes the import/export rules, Ministry of Climate Change which provides permission for GMO trade, and Department of Plant Protection for phytosanitary standards. Furthermore, a license from the Chinese side is required to allow Pakistani soya bean meal imports.

Coordination is required amongst the three institutions for traders in Pakistan to receive a license permitting exports while strong follow up is needed to convince China to issue license for GMO meal imports from Pakistan. Given that China has been importing GMO soya bean from US, obtaining such a license should not be an obstacle.

Pakistan’s soya bean imports have increased in recent years because of higher awareness of its protein potential for meal. This indicates the country’s knowledge and capacity to convert soya bean seed imports into meal. Even a 10 percent share of US’s exports to China would enable Pakistan to easily achieve the $1 billion target of exports to China.

Admittedly, the solution put forward is more along the lines of becoming a facilitator or an agent rather than increasing domestic production sustainable. But it’s arguably a more viable option of decreasing CAD without assistance from friendly countries or donor agency.