The Dagha style

We love the Commerce Secretary's way of doing things. He asks the Trade Associations, etc., for inputs on policy, sets up committees, and takes off for distant shores. The Press coverage that follows his trade diplomacy is his GPS tracker.
The Dagha style in no way detracts from his boundless energy, his skills or his commitment to the cause. Indeed, our grape wine tells us he is a highly regarded officer, sought after by several ministers.
The Foreign Office mandarins tell us 'style is substance'. They can get away with it too: they don't have any hard numbers hounding them. They largely deal in hard-to-quantify intangibles. They also have lots of alibis: if the green passport is a red rag at the international airports (theirs is diplomatic red) it is because of all the illegal immigrants that someone else has to control, not the FO. If Pakistan has an unsavoury image abroad it is not a foreign policy failure but that of domestic policies to control extremism or ensure human rights. If all else fails, they can always hide behind the impregnable shield of non-ownership: "but we don't make foreign policy!"
For the Commerce Ministry style can't be substance. Bureau of Statistics hands down the mark sheet each month. The recent pass marks, after years of failing grade, must be a cause of comfort for the Commerce Secretary. Victory celebrations, however, will have to wait for more definitive results.
The 10% export growth registered in the first five months of the current fiscal is generally attributed to the export package and the 'anticipated' weakening of the rupee. That is arguable. Package incentives are yet to kick in, mainly thanks to the convoluted refund mechanism that will take at least 45 days following the receipt of export proceeds. The exchange rate factor is still 'work-in-progress'.
Besides, had the exporters been swayed by these considerations they would have sold cheap. Instead, we see an increase in per unit prices (especially textiles, which account for about 50% of the five month export gain), suggesting that international prices are firming up.
To get a better handle on export prospects we need to have a look at the positives - and lessons learnt.
There has been a definite improvement in the energy and security situation, and the held up refund issue is largely behind us- partly reimbursed, mostly internalized. The upward trend of international prices is likely to hold, and export numbers should get a slight fillip from sugar and wheat exports. The inducement of the export package is yet to play out, as is the full impact of the rupee depreciation, but they hold out hope.
Then there is the Commerce Minister factor. He listens and acts. Exporters trust him, and know that in his own low-keyed manner he will deliver.
Will all this be enough to propel exports? If FY 18 exports reach $25 billion (15% growth) should we celebrate? What percentage of imports will exports pay for? Going beyond FY 18, what are the export numbers we should be aspiring to? Would $30 billion in FY 19 be a realistic target?
FY99 to FY11 is the only period where we saw fairly robust and sustained export growth, tripling from 7.8 billion to 24.9 billion dollars. Why? What are the lessons to learn?
The foundations of this remarkable resurgence can be traced to trade liberalization (lower tariffs and fewer slabs, dismantling of trade restrictions, withdrawal of concessionary SROs, sharply lowered administrative barriers, improved Customs procedures), roll back of subsidies, buckling up of trade infrastructure and greater trade facilitation. Macroeconomic stability, stable exchange rate and competitive export-finance underpinned these reforms.
The momentum generated by the reform process was sturdy enough to withstand, for another few years, the reversal that commenced in 2008.Ironically,the more 'import management' we tried (through higher tariffs, regulatory duties, non-tariff barriers) the more the import bill grew - and exports declined! Thus, in 2017 exports could finance only 38% of imports, as against 60% in FY11.
Trade openness, by itself, is of course not the passport to greater export performance. Producing what the market wants, competitiveness, development and export finance, fair exchange rate, all weigh in. But there is enough evidence to suggest that trade restrictiveness and export growth cannot walk together.
We malign FTAs but forget FTAs are less about tariff concessions and more about 'forced' structural policy change. We demand more protection but forget unreasonable protection keeps us out of the global value chain, the only route to a quantum leap.
Chile, China, India, Vietnam, Bangladesh... all took the liberalization road and saw their exports soar. Following trade reforms, we saw India's share of world exports grow from 0.61% to 1.65%, that of Vietnam from 0.14% to 1.17%, of Bangladesh from 0.06% to 0.19%. Over the same period, Pakistan's share declined from 0.18% to 0.13%!
Even if we ignore the low base-effect, a 10 -15% increase in our exports is not going to be anywhere near enough. Imports are going to outdistance exports by a wide margin. Our exports have to grow at least 30% a year for the next several years to come closer to financing the trade gap. This is not going to happen unless we undertake a serious reform effort.
There is going to be a lot of resistance to trade reforms. Our businesses, addicted to rents, won't give up easily - and they have a strong lobby. They have a seductive, though misleading, story too. Talk of self-sufficiency, localization before globalization, 'why pay farmers abroad and not our own', resonates. The overwhelming empirical evidence that trade restrictiveness promotes inefficiency and uncompetitiveness, hurts consumer interests, and ultimately leads to inflation and loss of jobs, gets lost in the din of nationalistic fervor massaged by vested interests.
To put export-led growth at the heart of our policy framework is going to be a hard sell for the Commerce Ministry. It will need to put a coalition together - businessmen with long term interests, academia, media - to fight for the cause. It will take time but a beginning has to be made NOW, starting with an impartial analysis of the costs of protectionism.
The real battle is at home, not in Canberra, Buenos Aires, or Brasilia. Policy capture is the enemy. Changing policy-maker mindset, through solid research, is the key.
shabirahmed@yahoo.com