What President Trump means for Pakistan

By Shehryar Nabi

What does the Trump administration mean for Pakistan? Here are the key issues to watch:

Relations with the United States

The American foreign policy establishment has held an increasingly critical view of Pakistan. Despite being a U.S. ally in fighting terrorism, Pakistan has been accused of distinguishing between “good and bad” terrorists and supporting militant groups that threaten U.S. interests. Former President Barack Obama even questioned why Pakistan should remain an ally. Pakistan currently relies on the U.S. for $850 million worth of economic and military aid, which has declined over the past few years.

At his confirmation hearing, Secretary of Defense James Mattis said he will incentivize Pakistan to eliminate terrorists within its borders. He also said he would encourage collaboration between Pakistan and Afghanistan to combat terrorism. Mattis has in the past stressed the importance of maintaining an alliance with Pakistan despite frustration with its anti-terror efforts.

National Security Advisor Michael Flynn has taken a tougher position. In his recent book, The Field of Fight, he wrote that Pakistan must choose between helping extremists or receiving harsh treatment from the United States. If this translates into less aid or more trade restrictions, sectors of Pakistan’s economy that depend on American money could suffer.

Pakistan’s tightening geopolitical relationship with China may put it in an awkward position if the U.S.-China relationship starts to deteriorate. Trump talked disparagingly about China’s effect on the American economy during the presidential campaign. Trump’s pick for secretary of state said that he would block China’s access to artificial islands it built in the South China Sea. China responded with aggressive statements. But hostilities could be checked by Trump’s pick for ambassador to China, whom the Chinese government has praised as “an old friend”.

Continued expansion of America’s relationship with India could also strain U.S.-Pakistan relations. In August, the U.S. and India signed an agreement that relaxed institutional impediments to military logistics-sharing between the two countries. In December, the U.S. also officially recognized India as a “Major Defense Partner”, guaranteeing future military collaboration. Secretary of Defense Mattis has said he would continue strengthening U.S.-India ties.

These actions are perceived as an attempt by the U.S. to check China’s influence in Asia. If China takes issue with a militarily empowered India, it might find an even stronger ally in Pakistan, which is likely to be alarmed by the situation. This would only add to the awkwardness of Pakistan’s position with the U.S.

Climate change

Rising sea levels and drought induced by climate change threaten to create tens of millions of climate refugees in Pakistan. But Pakistan alone can’t do much about it beyond trying to adapt, because the main contributors to global warming are the United States, Europe and China.

There are clear signs that Donald Trump’s presidency would diminish America’s vital role in upholding global commitments to reduce greenhouse gases. As part of the Paris Agreement, the Obama administration vowed to shut down coal-fired power plants, which would lower U.S. carbon dioxide emissions by up to 28 percent. The Trump administration intends to withdraw the U.S. from the agreement and lift Obama-era regulations that limit the extraction of fossil fuels. He tweeted in the past that climate change was “created by and for the Chinese”, and he picked a climate skeptic to head the U.S. Environmental Protection Agency.

Without America’s cooperation in global pledges to reduce greenhouse gases, the world will move faster towards an atmospheric temperature of 2 degrees Celsius – widely considered the climate “danger zone”.

Remittances

Remittances – money sent by migrants to their countries of origin – make up seven percent of Pakistan’s GDP. 13 percent of those remittances ($1.3 billion) come from the United States. Remittances play a crucial role in making poorer families resilient during natural disasters and periods of economic uncertainty, and they can even spur entrepreneurship.

Pakistan could see a sharp increase in remittances from the United States in the near term if Pakistanis living there fear prejudice and send money back in case they have to return. This is precisely what happened after the September 11^th attacks in 2001 led to a rise in in anti-Muslim sentiment. From 2001 to 2002, remittances to Pakistan from the United States nearly tripled.

Why would Pakistanis fear prejudice? Trump’s campaign was marked by controversial statements about Muslims such as his proposed temporary ban on all Muslim travel to the United States, the notion that Islam hates America and the establishment of a Muslim registry. Hate crimes against Muslims also increased by 67 percent from 2014 to 2015, and there is concern that perpetrators of these crimes are empowered by Trump. However, recent polling data showing that overall American favorability of Muslims increased (mainly driven by members of the Democratic and Independent parties) during Trump’s campaign suggests growing prejudice and support for Muslims are parallel trends.

On Friday, Trump signed an executive order barring all immigration from seven Muslim-majority countries, and the White House hinted that Pakistan could be included in the future. However, there is room in the order for exempting immigrants on a case-by-case basis, and the order won’t apply to green card holders.

If these factors combine to foster anxiety among Pakistanis living in the U.S., remittances could rise in the near term. But if more Pakistanis leave the U.S. and fewer choose to migrate there, there will likely be a long-term slump in remittances.

Human capital

Thousands of Pakistanis go to the United States to study and work every year. Many of them stay in America and find employment in high-skilled jobs. This has contributed to a “brain drain”: Pakistan is missing out on the contribution of highly educated citizens who choose to work abroad.

But at the same time, many Pakistanis come back and make a real impact with the advanced knowledge acquired in other countries. This knowledge makes them great “human capital”.

If the Trump administration fosters the hostile environment described above, would Pakistan benefit from a “reverse brain drain” – when highly educated Pakistanis decide to come back? It might, but those Pakistanis may prefer to work in another country with organizations that reward advanced skills and talent. Pakistan lacks enough of those organizations.

If Trump’s presidency marks a longer-term decline in Pakistani access to American institutions, high-achieving Pakistanis who want to bring back global knowledge and experience will have a harder time doing so.

Exports

Exports are a key driver of economic growth in Pakistan. The United States is Pakistan’s top export destination with $3.7 billion worth of exports in 2015.

86 percent of those exports are from textiles, which dominate Pakistan’s manufacturing sector. Invigorating this currently struggling sector will lead to mass job creation that will reduce poverty and help prevent a future unemployment crisis.

Anger over the loss of manufacturing jobs in America was decisive for Trump’s election victory. He touted protectionist trade policies during his campaign to bring outsourced manufacturing jobs back to the United States.

He pledged to withdraw from the North American Free Trade Agreement (NAFTA) if it isn’t renegotiated in America’s favor, he killed the Trans-Pacific Partnership (TPP) and vowed to impose a 45 percent tariff on goods from China. While it’s unclear whether Trump’s top officials on trade would advocate these exact policies, they hold a similar, skeptical outlook on America’s trade deals.

This protectionism, if applied to Pakistan, will make it more expensive for Americans to buy Pakistani goods and may reduce export earnings from the United States.

Multilateral engagement with Pakistan

Pakistan receives billions of dollars from multilateral organizations such as the World Bank and the International Monetary Fund, both of which receive more funding from the United States than any other country.

The Trump administration has drafted, but not yet implemented, two executive orders that could lower U.S. commitment to these and other international organizations.

The first order cuts funding for any United Nations agency or other international body that, among other criteria, grants membership to the Palestinian Authority or Palestine Liberation Organization, funds abortion or receives money from any state that sponsors terror or violates human rights. The order further mandates a minimum 40 percent decrease in spending toward international organizations.

The second order requires a review of America’s current multilateral treaties and withdraws from those that are not directly related to national security, extradition or international trade.

The fact that the order has been delayed could mean it will be amended. But it signals that the Trump administration is serious about rolling back U.S. global engagements in the development sector. Resources for organizations that support healthcare, education, infrastructure development, energy and other sectors will likely be reduced. Indeed, the effectiveness of international donor money for development is subject to debate. But if the orders result in decreased global support for Pakistan’s development goals, achieving them will be a greater challenge.

Shehryar Nabi works in communications for the Consortium for Development Policy Research and the Institute of Development and Economic Alternatives.