Pakistan touts idea of free-trade pact with US

WASHINGTON, Aug 3 (Reuters) A free-trade pact with the United States would create jobs and prosperity in Pakistan that would help a US ally in a volatile region combat religious extremism, the country's commerce minister said today.

Commerce Minister Humayun Akhtar Khan said in a speech in Washington that a bilateral free-trade agreement would ''help Pakistan enormously'' but also open the South Asian nuclear power's market of 150 million people to US business.

Pakistan President Pervez Musharraf, who first proposed the FTA in December 2004, believes that ''the long-term solution to handling the extremism problem in Pakistan is to economically improve Pakistan,'' Khan said.

''We believe that our future lies in being part of the international mainstream and getting our people prosperous and getting our people more educated and getting women in the right place in our society,'' he said.

Khan told the Institute for International Economics (IIE) that 1 billion dollars in Pakistani garment exports to the United States would create 200,000 jobs, affecting more than a million people in a country where families average six members.

''You can imagine the impact that would have on our society and, in particular, the women in our society,'' he said.

The Washington-based IIE issued a study today showing what an FTA would increase bilateral US-Pakistan trade by forty to fifty percent, benefiting US exporters of grain, processed foods and machinery, and Pakistan's textile sector.

The study said that geopolitical considerations are ''central'' in any U.S. FTA with Pakistan, which shares borders with Afghanistan and Iran has been a key US ally in trying to curb Islamic extremists in that region.

Al Qaeda leader Osama bin Laden is believed to be in hiding in remote parts of Pakistan near the Afghan border, which lie outside the control of the Islamabad government.

Pakistan, which is negotiating a bilateral investment treaty with the United States, remains committed to multilateral trade liberalisation under the World Trade Organization, Khan said.

But a proliferation of bilateral or regional free trade pacts, some of which diverted trade away from Pakistan, made it ''essential for Pakistan to explore a very aggressive trade diplomacy policy,'' the minister said.

Analysts say it is not clear whether the United States -- which is negotiating free trade arrangements with Malaysia, South Korea, among others -- has the time or resources to start the process with new partners in the near future.

REUTERS VJ RK0315