U.S.-China Trade War: Is U.S. trying to bully Pakistan?

Analytics | | 13-10-2018, 16:00

The United States which is the largest contributor to the International Monetary Fund and has 17.68 per cent of voting rights in major decisions, said that it would examine closely Pakistan’s request of a loan from the IMF. U.S. officials may think that Pakistan found itself in such a situation because of Chinese debt. Pakistani authorities rejected this claim and pointed out that their indebtedness to China is much smaller than imagined. 

On Thursday IMF Managing Director Christine Lagarde confirmed that Pakistan had formally requested financial assistance from the Fund to address its economic challenges. According to the Pakistani newspaper Dawn, Prime Minister Imran Khan has sought loans from friendly countries, promised to recover funds stolen by corrupt officials, and embarked on a series of populist austerity measures. But help has been in short supply and economists' warnings have grown increasingly urgent. The final decision, however, was announced on Monday night when Asad Umar confirmed that the government would seek talks with the IMF on a "stabilization recovery program". It seems that Pakistan failed to borrow money from the old friends such as Saudi Arabia, China, Islamic Development Bank, and other non-IMF sources and the remittances sent by overseas Pakistanis are also not enough to compensate for some more time. 

Like Dawn’s Khurram Husain I also think that before a bailout for Pakistan, IMF should examine details of all Chinese loans and liabilities, draw up a detailed debt sustainability analysis and, where necessary, ask the Pakistani authorities to first seek a rescheduling of these terms from the Chinese before any bailout can be arranged. It is the right of people of Pakistan and respect to the mandate which has been given to the new government of Pakistan that all stakeholders including public should be aware of the terms and conditions of deals through which Chinese investment is coming into Pakistan. According to Forbes, Pakistan has two choices. One is to cancel Chinese projects to save funds, as Malaysian Prime Minister Mahathir Mohamad did back in August.  He canceled two major infrastructure projects by Chinese companies for adding to the country’s heavy foreign debt burden. The other choice for PM Imran Khan is to reschedule the country’s debt to China. Perhaps, by swapping debt with equity, which in essence will transfer CPEC ownership to Beijing is highly unlikely. But why does China not reschedule Pakistan’s debt itself when it claims to be the closest friend of Pakistan? This is something which should be discussed by China and Pakistan without interference of any third party. 

Increased Chinese involvement in Pakistan’s economy could bring benefits and but risks cannot be ruled out. But it is not something as serious as ongoing U.S.-China Trade War. According to Alex Ward (Vox), America’s trade deficit with China reached a new high — $34.1 billion — in September. That’s a 13 percent increase compared to last year and is the second-straight record month after a deficit of $31 billion in August. That takes America’s trade deficit with China for the year to $225.8 billion — about $30 billion more than at the same point in 2017. This could prove to be a problem for Trump. Over the past year, America has placed about $200 billion worth of tariffs on Chinese goods, in part to make Chinese products more expensive so Americans do not buy them. But Beijing has responded to the tariffs in kind, making it much harder for American companies to sell in the Chinese market. China has purposefully increased its exports to the U.S. while, at the same time, it has stopped buying as much from the U.S. manufacturers. The United States will not miss any opportunity to give a tough time to China. It can be through a direct trade war or by pressurizing Chinese allies such as Pakistan by using its influence on IMF.  

The U.S. can use its authority over IMF as the largest contributor but it should have sympathy towards other countries and try to avoid interference in their matters of personal nature. For example: India finalized a deal of $5 billion with Russia to purchase S-400 air defense system. Donald Trump on Wednesday said that India would soon find out the consequences. Trump himself signed different arm sales agreements with Saudi Arabia worth $100 billion during his visit to Kingdom soon after being elected as president. Moreover, the Trump administration plans to withdraw from an international treaty provision that allows countries to sue the United States at the International Court of Justice (ICJ) in The Hague. President Trump's national security adviser, John Bolton, said that the amendment to the Vienna Convention on Diplomatic Relations violates U.S. sovereignty. But does America`s interfering in bilateral agreements between China and Pakistan not violate anyone’s sovereignty? President Trump withdrew from the 2015 nuclear pact with Iran reached by his predecessor Barack Obama and other world powers and ordered tough U.S. sanctions on Tehran. Recently, the International Court of Justice ordered the U.S. to lift new Iran sanctions. The Americans tried to brought Turkey on its knees through economic sanctions. Donald Trump doubled import tariffs on Turkish steel and aluminum, partly to put pressure on the country for its continued jailing of Andrew Brunson, an American pastor, allegedly involved in military coup against Turkish president Recep Tayyip Erdogan. I think that the U.S. credibility has been seriously compromised in recent months. 

Pakistan’s relations with the United States have soured in recent years over the war in Afghanistan. Last year on many occasions, the American authorities have accused Pakistan of playing a ‘double game’ on fighting terrorism. The reality is that the United States is imperially overstretched which means that it has already extended itself beyond its ability to maintain or expand military and economic commitments. Moreover, it has utilized all the available diplomatic tactics and instruments. Its military doctrines are well exposed and well understood by other rival states. The U.S. and its NATO allies have been fighting the Taliban since 2001, but victory has eluded them. Trump questioned American aims in Afghanistan during the 2016 election campaign and his commitment remains in doubt. After a tough internal debate, Gen. John Nicholson, U.S. commander in Afghanistan, persuaded Trump to deploy additional 3,000 troops, taking the total to about 14,000. Trump knows very well that it is impossible for the U.S. to simply run from Afghanistan; that is why, he wants to put all the burden of America`s failure on Pakistan by painting a bad image of it.

For more than a decade, the CIA has accused Pakistan’s Inter Service Intelligence of playing a double game in which it pledges to destroy the Afghan Taliban, but protects its fighters, which it views as a useful proxy to destabilize the Kabul government. The issue has as much to do with geopolitics as counter-terrorism. According to Pakistani military, the country’s chief strategic threat is coming from an Indian-backed government in Kabul, which is completing a hostile encirclement of Pakistan. The U.S. is more than aware of Pakistan’s position on Afghanistan. 

The United States can collaborate with China for its peace building process in Afghanistan. Peace in Afghanistan cannot be maintained without pursuing Pakistan to help the U.S. deal with the Taliban. Pakistan still maintain its influence on warlords in Afghanistan which can provide security for the TAPI project. China, the United States and Pakistan should not pick up a bilateral fight; rather they should work together for their shared interest in stabilizing Afghanistan and to bring peace there. Pakistan should look towards China for a bailout by offering it more attracting investment opportunities including TAPI. A give-and-take strategy would be more beneficial for the United States, China and Pakistan to overcome their ongoing economic and political crises.