Future of Pak-US Alliance: Boosting Ties in Economic Partnership

With the inauguration of the Trump administration in January 2025, there is a renewed focus on revitalizing international partnerships. While Trump differs from his predecessor, Joe Biden, in various policy areas, both share the goal of containing China. In this regard, Pakistan’s strategic alignment with China, central to its foreign policy, combined with its growing economic ties in the Pak-US Alliance (the United States is the top destination for Pakistan’s exports), elevates its relevance in the global geopolitical landscape.

Regarding US-Pakistan relations, despite past challenges, including US concerns over Pakistan’s ballistic missile program and alleged human rights violations, the bilateral partnership remains substantial. The future of this relationship will depend on both sides respecting each other’s interests while safeguarding their mutual priorities. Currently, the environment seems conducive to strengthening relations.

Pakistan aims to focus on enhancing economic collaboration with the United States, seeking to strengthen business-to-business ties and foster deeper people-to-people connections across various sectors. This vision highlights the importance of economic diplomacy as a tool for deepening ties and promoting shared prosperity, aligning with the national security strategies of both countries and contributing to a peaceful and prosperous global future.

A Legacy of Collaboration

Pakistan and the United States share a longstanding history of collaboration that extends well beyond diplomatic exchanges. At the heart of their relationship lies robust economic ties, forming a cornerstone that has endured through various global and regional challenges. This partnership, built on mutual interests and shared opportunities, holds immense potential to expand and evolve in the years to come.

Economic Diplomacy: Charting a New Course for Bilateral Ties

With the Trump administration prioritizing international partnerships, Pakistan envisions enhanced economic collaboration. Strengthening business and people-to-people connections across various sectors, including Information Technology (IT), agriculture, and manufacturing, is central to this vision. Pakistan’s Planning Minister Ahsan Iqbal recently emphasized expanding trade, market access, and joint ventures with the US. Pakistan’s Foreign Office also advocated for non-interference as the foundation of U.S.-Pakistan relations, seeking a strengthened relationship under President Trump.

The recent farewell meeting between U.S. Ambassador Donald Blome and Pakistan’s Finance Minister Muhammad Aurangzeb on December 31, 2024, also reiterated the importance of economic cooperation. Blome reaffirmed U.S. support for Pakistan’s economic reforms, while Aurangzeb outlined the country’s growth agenda, noting the U.S. as Pakistan’s largest trading partner and stressing opportunities in IT and digital services.

Also See: The Pakistan-US Equation: From Diplomacy, Trade to Geopolitics

Revitalizing Trade: Key Sectors Driving US-Pakistan Economic Growth

Besides diplomatic optimism, the United States remains one of Pakistan’s top export destinations, a testament to the thriving trade relationship between the two nations. The United States remains a pivotal export destination for Pakistan, with trade figures reflecting a robust economic relationship. In 2022, Pakistan’s total exports to the U.S. amounted to approximately $6.0 billion, marking a 13.5% increase from the previous year.

Pakistani exports span a diverse range of sectors, including textiles and apparel, agricultural products, IT services, garments and leather goods, pharmaceuticals and medical equipment, chemicals and raw materials, and sports equipment. These products enrich the U.S. market by offering high-quality, cost-effective goods that sustain jobs in sectors such as retail, logistics, and manufacturing. For American consumers, these goods represent a blend of affordability and premium quality.

Untapped Potential: Expanding Trade and Investment Opportunities

US-Pakistan trade relationship transcends mere transactions; it fosters mutual understanding, creates employment in both nations and builds bridges of trust and interdependence. However, despite the existing strong economic ties, there remains significant untapped potential that could drive the next wave of progress. For example, U.S. foreign direct investment (FDI) in Pakistan was $127 million in 2022, a 59.3% decline from 2021, while Pakistan’s FDI in the U.S. was $144 million, down 14.3% from the previous year. There is potential for improvement in this area

Pakistan has the potential to increase exports of agricultural products such as rice, semi or wholly milled, and bed linen of cotton to the U.S., with an estimated additional trade potential of $5.3 billion.
As a major supplier of cotton-based textiles, Pakistan has opportunities to expand its market share in the U.S. by enhancing the value-added textile sector and addressing supply-side constraints.
Pakistan benefits from the U.S. GSP program, which provides duty-free access to over 3,500 products. However, the program does not cover textiles, leather, and apparel exports, limiting its impact on Pakistan’s major export sectors.
Collaborative initiatives such as joint ventures and technology transfers could further propel both economies forward. Pakistan’s burgeoning pool of skilled labour and the US’s technological leadership present an ideal synergy for innovation and growth.

The Strategic Importance of Pakistan: Geopolitical Considerations

Moreover, Pakistan’s strategic geographic position plays a crucial role in shaping its significance as a key player in regional and global geopolitics, especially in the United States. Situated at the crossroads of Central Asia, South Asia, and the Middle East, Pakistan provides the U.S. with access to emerging markets in Central Asia, which are rich in natural resources and offer vast economic potential. This proximity allows the U.S. to engage with the region’s burgeoning economies, facilitating trade, investment, and energy cooperation.

Pakistan’s trade agreement with China makes it an ideal re-exporting hub, and U.S. companies could leverage this position by setting up manufacturing facilities in Pakistan. These goods could then be exported to China as Pakistani products, providing the U.S. with a neutral platform to access the Chinese market while minimizing direct reliance on Beijing.

Furthermore, Pakistan’s position offers access to the Middle East, a region of paramount importance due to its energy resources, political influence, and strategic shipping lanes such as the Strait of Hormuz. By fostering economic and diplomatic ties with Pakistan, the U.S. can leverage these connections to secure energy resources and maintain stability in the region.

US-India Alliance: Implications for Regional Stability and Global Peace

While the US-Pakistan partnership promises mutual prosperity and peace, the U.S.-India alliance, while focused on strengthening bilateral ties and countering China’s influence in the Indo-Pacific, has raised several concerns regarding global peace and stability. India’s growing assertiveness, particularly in its relationships with neighbouring countries such as Nepal, Bangladesh, Sri Lanka, and Pakistan, has led to tensions. U.S. support for India in these contexts is sometimes viewed as exacerbating regional instability.

One notable example is the ongoing situation in Kashmir, where human rights concerns and restrictions on dissent have drawn international criticism. Similarly, India’s weaponization of the Indus Water Treaty (IWT) has raised concerns, particularly about potential violations of the treaty and environmental impacts on downstream regions, such as Pakistan. India’s development of ballistic missiles and nuclear-capable submarines has raised concerns about nuclear proliferation in the region. The U.S. support for India’s defence initiatives, including co-producing fighter jet engines and armoured vehicles can potentially contribute to an arms race in South Asia.

In addition, the strengthening of U.S.-India ties, particularly through initiatives like the Quadrilateral Security Dialogue (Quad), has been viewed by some as undermining regional organizations such as the South Asian Association for Regional Cooperation (SAARC) and the Shanghai Cooperation Organization (SCO). These organizations aim to promote economic cooperation, regional stability, and collective security, and the U.S.-India collaboration is perceived by some as potentially sidelining these regional efforts.

Furthermore, India’s plans to build hydropower dams in regions like Tibet have significant environmental implications for neighbouring countries, including India itself. The U.S.-India collaboration on these projects has raised concerns about the environmental impact and potential violations of international agreements like the Indus Water Treaty.

The upcoming visit of U.S. National Security Adviser Jake Sullivan to India in January 2025 will be critical. He is expected to address key issues such as defence, security, artificial intelligence, and environmental concerns, including the impact of Chinese dams. His visit could significantly influence the direction of U.S.-India relations and their broader impact on regional and global stability.

Conclusion: A Path Forward for a Stronger Pak-US Economic Alliance

In a nutshell, Great power competition is a key focus of Trump’s foreign policy, with a strong emphasis on limiting China’s influence. The U.S. is building closer ties with India, hoping it will act as a counterbalance to China. However, the U.S. is overlooking the potential of Pakistan, which could play a significant role in enhancing its strategy.

Economic engagement between the US and Pakistan can set an example of how economic collaboration can pave the way for a stronger, more dynamic alliance. The future of this relationship lies in recognizing untapped opportunities and leveraging them to create lasting, mutually beneficial progress.

The views expressed in this article are the author’s own. They do not necessarily reflect the editorial policy of the South Asia Times.

Usama Qazafi

Usama Qazafi is a passionate social media enthusiast with extensive early experience in digital marketing. Having collaborated with numerous social media teams, he also possesses practical skills in camera work. Currently pursuing an undergraduate degree in Mass Communications, he stands out as the youngest member of the SAT team

South Asia Times

Future of Pak-US Alliance: Boosting Ties in Economic Partnership