Navigating Great Power Rivalry through Economy and Trade: Pakistan’s Strategic Balancing in the US-China Competition (2013-2025)

Abstract

Based on the U.S.-China’s growing strategic competition from 2013 to 2025, the present paper explores the Pakistan’s strategic balancing with specific focus upon the economy and trade aspect of great power competition. It investigates four key facets of economic competition between the U.S. and China; that include tariffs and sanctions, as well as export controls; supply chain restructuring and decoupling; trade lawsuits and WTO litigation; and competing initiatives for investment, financing, and development of infrastructure, including the Belt and Road Initiative (BRI) by China and the G7 Partnership for Global Infrastructure and Investment (PGII). It next explores Pakistan's economy in terms of macroeconomic volatility, the balance-of-payments pressures, public debt, fiscal constraints, competitiveness of exports, external financial dependence and recurrent IMF stabilization programmes. The study is based on Neoclassical Realism theory in which external systemic pressure such as strategic and economic competition between the U.S. and China is considered as independent variables, structural economic vulnerability of Pakistan as intervening variable and Pakistan's strategic balancing is dependent variable. The study is a mixed-methods longitudinal (time-series) case-study, based on qualitative analysis of official documents and policy statements, qualitative process tracing and quantitative analysis of economic, trade, financial and strategic indicators. The results provide evidence that the escalation of the U.S.–China economic competition created overall pressures on Pakistan by changing business and trade formats, foreign investment, technology developments, supply lines, infrastructure financing, and international rules and regulations governing economy and trade. But such pressures did not bring about either simple alignment with one of the major powers. Rather, Pakistan's long-standing economic shortcomings limited their policy space and called for different kinds of interaction with the outside world. As a consequence, the study concludes that Pakistan was engaged in 'between the margins' rather than in ‘opting out' of relationship with ‘narrowing down' the options. The evidence does support the Neoclassical Realist thesis that systemic pressures impact the domestic economic constraints, leading to foreign-policy outcomes driven by state capacity, economic necessity, and strategy-seeking for strategic flexibility.