The Complex Web Of Us-Afghanistan Trade Relations

The United States has a history of diplomatic and trade relations with Afghanistan. In 2002, the US Agency for International Development (USAID) began working to expand and strengthen Afghanistan's economy, creating jobs and improving the resilience of the private sector. Despite the US withdrawal from Afghanistan in 2021, the two countries continue to engage in trade. In 2023, US exports to Afghanistan were $50 million, while imports totalled $20 million. However, the volume of direct exports to Afghanistan is relatively low, accounting for a small fraction of total US exports.

US-Afghanistan trade statistics

The United States does trade with Afghanistan. In 2023, US goods exports to Afghanistan were $50 million, a 127.7% increase from 2022 but a 96% decrease from 2013. US goods imports from Afghanistan totalled $20 million in 2023, an 11.1% decrease from 2022 and a 56% decrease from 2013. The US trade balance with Afghanistan shifted from a goods trade deficit of $579,000 in 2022 to a surplus of $30 million in 2023. US foreign direct investment (FDI) in Afghanistan was $17 million in 2022, a 6.3% increase from 2021.

Afghanistan's economy opened up to international trade in 2001 after the collapse of the Taliban government. The country has few commercial barriers for imported products, and customs duties have been kept flat due to weak imports. In 2021, the share of trade was estimated at 51% of Afghanistan's GDP. The country traditionally exports items with low value, such as dried fruit, carpets, cotton, cereals, and non-alcoholic beverages. Opium is the main export of the country, although it is not officially recorded. In 2023, Afghanistan's exports totalled $1.9 billion, a slight 0.4% increase from the previous year. Coal exports contributed significantly in 2022 at $476 million, but experienced a notable 46% reduction to $257 million in 2023. Food exports grew by 13% to $1.3 billion, while textile exports surged by 46% to $281 million. Pakistan and India are Afghanistan's primary export destinations, with shares of 54% and 31%, respectively. Imports surged to $7.8 billion in 2023, a 23% increase from the previous year. Food, textiles, and minerals collectively accounted for over half of Afghanistan's imports.

In 2022, Afghanistan was the 151st largest exporter in the world, with exports totalling $1.49 billion. The top exports were coal briquettes ($337 million), raw cotton ($193 million), grapes ($156 million), insect resins ($126 million), and other nuts ($113 million). The top export destinations were Pakistan ($847 million), India ($414 million), China ($41 million), the United Arab Emirates ($32.5 million), and Turkey ($29.4 million). In the same year, Afghanistan was the 139th largest importer in the world, with imports totalling $5.88 billion. The top imports were wheat flours ($843 million), palm oil ($373 million), rolled tobacco ($352 million), wheat ($208 million), and packaged medicaments ($188 million). The top import origins were the United Arab Emirates ($1.22 billion), Kazakhstan ($979 million), Pakistan ($975 million), China ($551 million), and Uzbekistan ($525 million).

Impact of US withdrawal on foreign trade

The US withdrawal from Afghanistan has had a significant impact on the country's economy and foreign trade. The Taliban's takeover has resulted in a collapse of the economy, with the country facing a humanitarian crisis and a return to the restrictive policies of the previous Taliban regime. The US and its allies have frozen Afghanistan's foreign reserves and imposed sanctions, further exacerbating the economic crisis.

The US had previously provided significant assistance to Afghanistan, particularly in the areas of security and economic development. With the withdrawal, this support has been cut off, and the country is now facing a liquidity crisis and a lack of access to international capital markets. This has disrupted trade networks and impacted the country's ability to produce and export goods, particularly in the agricultural sector.

The loss of US support has also affected Afghanistan's ability to engage in international trade. The country's membership in international organizations, such as the World Trade Organization, has been called into question, and there are concerns about the recognition of the Taliban as the legitimate government. This has created uncertainty for businesses and investors, further hindering economic growth and foreign trade.

The impact of the US withdrawal on Afghanistan's foreign trade is complex and multifaceted. The loss of economic and security assistance from the US and its allies has disrupted the country's economy and trade networks. The humanitarian crisis and lack of recognition for the Taliban government further compound the challenges, making it difficult for Afghanistan to engage in international trade and attract foreign investment.

The consequences of the US withdrawal extend beyond Afghanistan's borders, particularly for countries that rely on US protection and support. The perception of US weakness in the wake of the withdrawal has raised concerns among its allies, including South Korea, Taiwan, and Israel. There are fears that the US may not be able to honour its commitments to these countries, leading to increased instability and potential conflicts in the region.

Overall, the US withdrawal from Afghanistan has had a detrimental effect on the country's foreign trade and economy, with consequences that reach beyond Afghanistan's borders. The loss of US support, combined with sanctions and frozen assets, has disrupted trade networks and hindered the country's ability to engage in international trade. The ongoing humanitarian crisis and the return to restrictive Taliban policies further exacerbate these challenges, creating a difficult environment for economic growth and foreign investment.

US foreign aid to Afghanistan

The US has provided extensive foreign aid to Afghanistan, including military, security, development, and humanitarian assistance. Since 2002, the US has provided nearly $88 billion in security assistance, $36 billion in civilian assistance, and nearly $3.9 billion in humanitarian assistance to Afghanistan.

Military and Security Assistance

The US has provided significant military aid to Afghanistan, particularly through the Department of Defense (DoD). Between 2001 and 2020, the US disbursed $72.7 billion in current dollars ($81.6 billion in constant 2019 dollars) in military aid to Afghanistan. This included equipment, supplies, services, training, funding for salaries, and infrastructure support. The Afghan National Defence and Security Forces (ANDSF) received around $18.6 billion worth of military equipment through the Afghanistan Security Forces Fund (ASFF). The US also provided security assistance to the Afghan National Defense and Security Forces, including the Afghan National Army, Afghan National Police, Afghan Air Force, and Afghan Special Security Forces.

Development and Humanitarian Assistance

The US has also provided substantial development and humanitarian assistance to Afghanistan. This includes support for education, health, women's empowerment, rule of law, and the protection of the rights of women, girls, and minorities. The US has invested in improving access to essential services, promoting economic growth, fighting corruption, improving health and education services, and supporting Afghan civil society. Since the Taliban takeover in August 2021, the US has provided nearly $327 million in additional humanitarian assistance to Afghanistan, bringing the total humanitarian assistance since then to more than $1.1 billion. This funding addresses the needs of vulnerable Afghans and those who have fled to neighbouring countries. The US is the single largest donor of humanitarian assistance to Afghanistan.

Recent Developments

In June 2021, the US announced its continued support for a peaceful and stable Afghanistan. This included providing COVID-19 vaccines, critical emergency medical assistance, and humanitarian assistance to address the pressing needs of Afghans, including internally displaced persons. The US also reaffirmed its commitment to security assistance, development assistance, and diplomatic engagement to support Afghanistan.

US-Afghanistan diplomatic ties

The United States and Afghanistan established diplomatic relations in the 1920s, with the first contact between the two nations occurring in the 1830s when Josiah Harlan, an American adventurer, travelled to the Indian subcontinent with the intention of becoming the King of Afghanistan. Official diplomatic relations began in 1921 under the leaderships of King Amanullah Khan and President Warren G. Harding, respectively. In 1935, the United States established its first official Kabul Legation, which was elevated to an embassy in 1948.

In the years following World War II, the United States replaced the United Kingdom as the primary power in Afghanistan's affairs. During the Cold War, Afghan-American relations became important as the United States sought to counter the spread of communism and the Soviet Union's influence in South Asia. The United States provided Afghanistan with economic assistance, focusing on developing the country's physical infrastructure, such as roads, dams, and power plants.

In 1978, following the Saur Revolution, relations between the two nations became strained. The United States reduced bilateral assistance and terminated a small military training program. However, after the Soviet invasion of Afghanistan in 1979, the United States supported diplomatic efforts to achieve a Soviet withdrawal and provided generous contributions to the refugee program in Pakistan. During the Soviet occupation, the United States provided about $3 billion in military and economic assistance to the Mujahideen groups.

Following the September 11 attacks in 2001, the United States invaded Afghanistan, overthrew the Taliban government, and captured Osama bin Laden in Pakistan. This invasion led to the reconstruction of Afghanistan and the resumption of its diplomatic relations with the international community. The United States played a leading role in Afghanistan's reconstruction, providing billions of dollars in aid and supporting the new government of Afghan President Hamid Karzai.

In 2012, the United States and Afghanistan signed a strategic partnership agreement, committing to a long-term relationship and strengthening their bilateral ties. However, in 2021, the Taliban regained control of Afghanistan, leading to the withdrawal of U.S. and allied forces. Since the Taliban takeover, the United States has shifted to a position of pragmatic engagement and has focused its efforts on providing humanitarian aid and targeted assistance to meet basic human needs and prevent an economic collapse.

US-Afghanistan trade organisations

Afghanistan and the United States have had a history of bilateral trade relations. In 2023, US goods exports to Afghanistan were $50 million, a 127.7% increase from 2022, while imports from Afghanistan totalled $20 million, a decrease of 11.1% from the previous year.

The US has been actively involved in Afghanistan's economic growth and development, with organisations like the US Agency for International Development (USAID) working to expand the Afghan economy and create jobs. USAID has partnered with the business community, the former Government of Afghanistan, international organisations, and neighbouring countries to help Afghanistan integrate into the international economy.

Afghanistan has also been a member of the World Trade Organization (WTO) since 2016, and it belongs to other international organisations that the US is also a part of, including the United Nations, the International Monetary Fund, and the World Bank.

Despite the US's efforts, direct exports of US goods to Afghanistan are a small fraction of total US exports. The loss of the Afghan market is thus unlikely to significantly impact US foreign trade. However, the US withdrawal from Afghanistan and the subsequent Taliban takeover have raised concerns about the credibility of US commitments overseas and the stability of partner countries.

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