China pays less tariff and receives goods via the Pacific shoreline . Why would they pay more tariff, pay for a longer route and that too by land which is more costly then shipping. Then Pakistan will add value to Mercedes cars or Microchip making machinery. Really ???
If then you charge no tariff to China for crossing multiple countries and subsidise the longer Chinese road and rail transport your foreign debt would get as high as that of the USA.
You have raised some valid points, if it were just re-exporting American products, overland, then yes, it would just be subsidizing the infrastructure even further. But what I am getting at is that with a free trade agreement in place between Pakistan and China, Pakistan could import certain products, and package them with domestic products for export to China. This all pre-supposed that Chinese tariffs on US goods remains much higher then tariffs on those same coming through Pakistan. Then we need to factor in re-exporting either via the sea ports or overland, depending on the final destination. This is where an economic feasibility review would need to be done. Doing this for products from the Middle East or Europe maybe a more plausible option.
Ideally, most production should be on the coast, in either Gwadar or Karachi, so that needless overland shipping is not done, but the politics and economic productivity of cities like Sialkot and Faisalabad would mean “final assembly” is done at the sea ports.
There are three sectors, IMHO, Pakistan could make this economically feasible, leveraging our location and, if geopolitics are influenced in Pakistan’s favor (the government prioritize foreign policies to achieve these economic initiatives);
1. Durable Medical Equipment. A growth industry Pakistan has a lot of experience in, and should double down on.
(
https://gvcc.duke.edu/wp-content/uploads/PakistanMedicalDeviceGVC.pdf)
2. Petrochemicals and pharmaceuticals (considering the potential pipelines and refineries proposed; TAPI, IPI, and one from a proposed GCC funded refinery near Gwadar); this is where geopolitics is key. Rather then building more roads; Chinese companies could build pipelines with fixed transit payments to the Pakistani government. This is of known strategic importance to China. Refineries producing the value added chemicals and pharmaceuticals precursors or final products would be an obvious product to continue onwards to China (Xinjiang is also a significant supplier of petrochemicals to the rest of China, so this would be Mideast oil and gas processed and passed onto to the established supply chain in Xinjiang)
3. Organic Foods (labor intensive but throughly modern organic farming could yield food varieties, different then those grown in China, to feed an ever richer population) A lot of China’s fruits come from Xinjiang. If our products can last long enough to get to market by land through Xinjiang, and are of sufficient quality, then the may be able to command a high enough price in an ever more wealthier by the day China.
China does import many similar products from other countries (such as India), therefore if Pakistan can either be cheaper at producing similar products or a better quality, it could gain market share.
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