ISLAMABAD: The United States and Pakistan continue to rely on a two-decade-old trade pact as their primary forum for addressing bilateral commerce and investment issues, even as U.S. businesses face persistent regulatory hurdles, high tariffs and non-tariff barriers in the South Asian nation.
The U.S.-Pakistan Trade and Investment Framework Agreement (TIFA), signed in June 2003, remains the key mechanism for trade discussions between the two nations. Despite regular talks, American firms report ongoing challenges with Pakistan’s import policies, customs procedures, intellectual property enforcement and investment restrictions.
Tariffs and Import Policies
Pakistan’s average Most-Favored-Nation (MFN) applied tariff stood at 10.3% in 2023, with higher rates for agricultural products (13.0%) compared to non-agricultural goods (9.9%). However, the country maintains much higher WTO-bound tariff ceilings—96.2% for agriculture and 55.2% for non-agricultural products—leaving room for sudden increases.
U.S. companies have raised concerns over sector-specific tariffs, particularly on automobiles and finished goods, as well as unpredictable import duty exemptions issued through statutory regulatory orders (SROs). Though Pakistan pledged under International Monetary Fund (IMF) programs to limit SROs, they remain in use without a clear phase-out timeline.
Non-Tariff Barriers and Import Bans
Pakistan maintains import restrictions on certain goods, allowing only public-sector entities or industrial consumers to bring in products like pesticide ingredients. Other imports require approvals from multiple ministries, creating bureaucratic delays.
In July 2024, Pakistan imposed a wheat import and export ban (SROs 1021 and 1022) to stabilize domestic prices amid high local production. The government may review the ban later in the marketing year but is expected to permit only limited imports, if any.
Customs and Trade Facilitation Issues
U.S. exporters face inconsistent customs valuations, with officials sometimes disregarding declared transaction values in favor of predetermined minimum values. Rules requiring physical invoices inside shipping containers (Customs Rules 389 and 391) have also drawn complaints, as they conflict with digital documentation practices used in global trade.
While Pakistan has engaged with U.S. authorities to address these concerns, the rules remain in place, leaving companies vulnerable to penalties.
Technical and Sanitary Barriers
Pakistan’s halal certification mandate (SRO 237/2019), which requires 66% of shelf life remaining on imported food products, has been a persistent hurdle. Though Pakistan eventually notified the WTO of the measure after U.S. pressure, compliance remains burdensome for exporters.
The U.S. beef market remains closed in Pakistan, though an export certificate agreement was reached in principle in 2023. Final approval was still pending as of December 2024.
After detaining shipments of U.S. genetically engineered (GE) soybeans in 2022, Pakistan amended its biosafety rules in late 2023. The National Biosafety Committee approved GE soybean imports in October 2024, with shipments expected to resume in early 2025.
Government Procurement and Intellectual Property Concerns
U.S. firms report losing Pakistani government contracts to lower-priced Chinese bids, despite often offering superior technical qualifications. Some allege their bids are used to pressure other suppliers rather than being fairly evaluated.
Pakistan remains on the U.S. Special 301 Watch List for weak IP enforcement. Though the country established IP tribunals, judges often lack expertise, fines are minimal, and counterfeiting remains rampant, particularly in pharmaceuticals, software and digital content.
Digital Trade and Investment Hurdles
Pakistan’s 2025 Personal Data Protection Act introduces strict data localization requirements, potentially complicating cross-border digital trade. The country also frequently blocks internet services for content deemed blasphemous or threatening to national security, disrupting business operations.
While Pakistan’s 2023 Investment Policy aims to attract foreign capital, equity caps in key sectors and repatriation delays persist. Though profit remittances improved in 2024—reaching $2.2 billion, up from $331 million in 2023—U.S. firms still face bureaucratic obstacles.
Taxation and Corruption Challenges
With one of the world’s lowest tax-to-GDP ratios (9% in FY2024), Pakistan relies heavily on multinational firms for revenue. U.S. companies report unfair tax assessments and pressure to prepay liabilities while local competitors evade taxes.
Corruption remains a major concern, with the National Accountability Bureau (NAB) criticized for politicized investigations that deter foreign investment.
Outlook
While Pakistan has made some progress on trade issues, structural barriers and inconsistent policies continue to hinder U.S. commercial interests. The TIFA process remains the primary avenue for dialogue, but American businesses urge stronger reforms to improve Pakistan’s trade and investment climate.