The early old ages of Pakistan ‘s economic system can be characterized by a weak industrial base, laterality of the agribusiness sector, deficiency of well-organized substructure, and above all eco-political instability. The chief aim of the policies of those old ages was to beef up the industrial base. To this terminal, Pakistan adopted a restricted trade government and protected its domestic industries with high duty and non-tariff barriers.
The period of the 1960ss was the period in which the industrial base was laid and in which rapid enlargement of big graduated table fabrication industries started in the state. While the extremely protected trade government remained effectual in this period, some extra policies were introduced to promote industrial exports from the state:
o an overvalued exchange rate, o export fillips, o discriminatory recognition entree to industries with export potency and automatic reclamation of import licences.
Consequently, both industrial production and exports registered a sensible addition during the sixtiess. However, industrial enlargement did non go on at the same rate in the following decennary of 1970ss. In fact, it suffered a reverse in the following decennary due to the nationalisation of industries. Although the authorities nationalized different types of industries in the state, it took three extra trade liberalisation steps to promote exports during this period:
o devaluation of the Pakistani Rupee by 57 % in 1972, o riddance of the export fillip strategy, and o the discontinuance of restrictive licensing strategy. These stairss stimulated exports particularly of manufactured merchandises.
Significant trade liberalisation has taken topographic point in Pakistan since the late eightiess at a gait that has been speed uping over clip. Import revenue enhancements have been reduced, the Statutory Regulatory Orders ( SROs ) have now been largely withdrawn and Non-Tariff Barriers ( NTBs ) have been mostly dismantled. In peculiar, the mean duty rate has declined aggressively from 77 per centum in 1985 to about 17 per centum.
Although trade policies were modified continuously in Pakistan, alterations of peculiar significance were made after the preparation of the new trade policy in 1987. After the incorporation of the other alterations, the trade policy led, inter alia, to a decrease in duty slabs from 17 to 10 and debut of a unvarying revenue enhancement in topographic point of trade good based gross revenues revenue enhancements. In fact, the authorities focused in this decennary chiefly on heightening the function of private sector in the economic system, increasing the fight and efficiency of the domestic industrial sector, and advancing exports. The specific steps that the authorities took in pursuit of these aims related to the proviso of different financial inducements such as o revenue enhancement vacations, o duty cuts and o other net income augmenting chances to the exporters o the maximal duty was reduced from 225 per centum in 1986-87 to 70 per centum in 1994-95. o the figure of custom responsibility slabs were reduced from 13 to 5. Os flexible exchange rate system introduced earlier was kept in consequence during this decennary.
The old ages 2000-2003 have witnessed the debut of such policies as publicity of liberalisation, deregulating, and decrease in the cost of making concern ; these policies have laid equal accent on promoting a stable macro economic model in footings of rising prices, involvement rate and exchange rate. Further, they have besides concentrated on the publicity of export of services, which had non received relative attending in the yesteryear. In fact, they have made the publicity of services an built-in constituent of the overall trade policy of the state.
Trade, as measured by the amount of imports and exports, has accelerated as a consequence of the procedure of greater openness of the economic system, particularly over the past 5 old ages. However, trade public presentation relative to many other developing Asiatic economic systems has non been that impressive. While the trade-to-GDP ratio has increased 0.4 per centum points per annum in Pakistan since 1990, it has increased by 0.8 per centum points per annum in India, 1 per centum point per annum in Korea, for illustration. The universe mean growing of trade as a portion of GDP, at 1 per centum per annum, has besides been higher than that of Pakistan.
REGIONAL / BILATERAL TRADE AGREEMENTS
In a command to liberalise and heighten its trade Pakistan has concluded several regional and bilateral understandings. Some of these are:
1. AGREEMENT ON SOUTH ASIAN FREE TRADE AREA
The South Asian Association for Regional Cooperation ( SAARC ) was established on December 8, 1985.The SAARC Charter was adopted by Governments of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka with a purpose to speed up the procedure of economic and societal development in Member States. The Agreement on South Asian Free Trade Area ( SAFTA ) was signed during the Twelfth SAARC Summit on 6 January 2004. The entry into force of the Agreement therefore launches the South Asian Free Trade Area which would be completed by 1st January 2016.
2. PREFERENTIAL TRADE AGREEMENT WITH IRAN
Pakistan signed a Discriminatory Trade Agreement with Islamic Republic of Iran on 4th March 2004. The Cabinet ratified the understanding on 25th May 2005. As reciprocally agreed the understanding has become operational from 1st September 2006. Under the Agreement, Pakistan offered grants to Iran on 338 duty lines, whereas Iran gave grants on 309 duty lines. Preferences granted by both states to each other screen about 18 % of MFN duty of both states.
3. Free Trade AGREEMENT WITH SRI LANKA
Free Trade Agreement ( FTA ) between Pakistan and Sri Lanka is operational from June 12, 2005. Under the Free Trade Agreement, Sri Lanka and Pakistan have agreed to offer discriminatory market entree to each others ‘ exports by manner of allowing duty grants. Sri Lanka would be able to bask duty free market entree on 206 merchandises in the Pakistani market including tea, gum elastic and coconut. Pakistan, in return, would derive responsibility free entree on 102 merchandises in the Sri Lankan market. These merchandises include oranges, basmati rice and technology goods.
4. Early HARVEST PROGRAMME WITH MALAYSIA
The Agreement on the Early Harvest Programme ( EHP ) for the Free Trade Area ( FTA ) between Malaysia and Pakistan was signed on Saturday, 1 October 2005 in Kuala Lumpur. The Pak-Malaysia EHP is operational from January 1st 2006 and shall run out upon entry into force of the FTA or 31st March 2007. The EHP is based on the 2004 import statistics and the Most Favoured State ( MFN ) applied tariff rates of 1 January 2005 of both states.
5. Early HARVEST PROGRAMME WITH CHINA
The Agreement on Early Harvest Programme ( EHP ) between Pakistan and China is operational with consequence from 1st January 2006. The EHP along with extensions associating to tariff grants and the clip agenda for decrease of duties was signed and exchanged on 5th April 2005.
The Early Harvest Programme ( EHP ) is a mini fast path preliminary to the FTA under dialogue. Both Pakistan and China have increased market entree for each other on points of important commercial involvements. The EHP has provided responsibility free entree to a significant figure of merchandises within following two old ages. Apart from this, a big figure of merchandises will be exportable by both counties at Margin of Preference in relation to MFN responsibility rate. In this manner both states would bask concessionary responsibility rate in comparing to exports of same merchandises from other states.
6. Free Trade AGREEMENT WITH MALALYSIA
The Comprehensive Free Trade Agreement ( FTA ) for Closer Economic Partnership between Pakistan and Malaysia was approved by the Cabinet on 6th November, 2007. It was signed on 08-11-2007 at Kuala Lumpur Malaysia.
The Agreement is a seasonably inaugural by the Government of Pakistan to procure market for its export merchandises in Malaysia and intensify the economic and trade relationship with an of import member of the part.
7. Free Trade AGREEMENT WITH CHINA
Chinese President Hu Jintao and his Pakistani opposite number Pervez Musharraf oversaw the sign language of a free trade understanding between the two Alliess here in Islamabad on 24th November, 2006. The architecture of the bilateral Free Trade Agreement includes Trade in Goods and Investments in the first Phase and the leaders of both the states have decided to negociate on Trade in Services during 2007 to enlarge the coverage of the Free Trade Agreement.
8. PREFERENTIAL TRADE AGREEMENT WITH MAURITIUS
Pakistan has besides signed Preferential Trade Agreement with Mauritius on July 30, 2007.
Five out of 10 members of ECO signed ECO Trade Agreement in July ; 2003.The senatory members are Pakistan, Iran, Turkey, Afghanistan and Tajikistan.
10. FRAMEWORK AGREEMENT ON Trade
In order to advance and widen trade dealingss, Pakistan started free trade dialogues with MERCOSUR states, which concluded on a Framework Agreement on Trade which was signed on July 21, 2006.
Attempts FOR MARKET ACCESS IN THE EU
The undermentioned enterprises have been taken to increase market entree in EU, which is Pakistan ‘s individual largest export market.
1. PAK-EU FTA
Pakistan has approached the EU to carry them to come in into FFTA dialogues with Pakistan. A scheme has been launched to convert EC that given the size of its marketand immense market potency, Pakistan can be a believable FTA spouse of EU.
2. MARKET ACCESS INITIATIVE IN NON-EU COUNTRIES
Pakistan has targeted non-EU provinces within Europe to subscribe PTAs taking to FTAs. These states include Switzerland, Norway, Serbia, Montenegro, Bosnia, Croatia Belarus, and Ukraine. Serbia and Bosnia have agreed to originate dialogues with Pakistan.
A bill of exchange text of PTA was sent to Russia for consideration on May 12, 2006. Later on their questions on the bill of exchange were clarified and the response is now awaited. Recently, the issue has been discussed between the PMs of the two states during the visit of Russian Prime Minister on 12-13 April 2007.
Trade POLICY 2008-09
The aims of current trade policy are: – o Trade Policy should be people centric i.e. aid in poorness relief. This is achieved by easing increased exports taking to increased production of exportable excesss thereby making more employment. o Focus should be on increased export net incomes by promoting and back uping exports of higher unit value merchandises. This implies emphasis on better quality, value add-on and conformity with international criterions. o Emphasis should be on bettering fight via decrease in cost of making concern, and back uping appropriate capacity edifice and perpendicular integrating. o Aid in marketing through trade publicity activities and increasing market entree. o Diversification of export merchandises and markets. The export mark for 2008-09 has been fixed at US $ 22.10 Billion. This represents a growing of 15 % over our last twelvemonth ‘s exports.
EXPORT STRATEGY AND MEASURES
The Export Strategy for 2008-09 has been designed maintaining in position the aforesaid aims and its salient characteristics are o Intensification of market intelligence. o Trade publicity by TDAP through activities such as forming exhibitions, engagement in trade carnivals and trade deputations. Besides auxiliary attempts by Ministry of Commerce through trade diplomatic negotiations for extra market entree chances, and to minimise any non duty barriers confronting our exporters in other states. O Enhancing fight of exports by assisting cut down costs of making concern. Hence assorted steps are being proposed to simplify procedural demands including alleviation through comprehensive nothing evaluation of assorted export sectors. o Improvement of physical substructure through coordination with concerned Government bureaus since hapless status of the substructure imposes excess costs on our exporters. o Alternatively of supplying hard currency inducements or subsidies to exporters, particularly in position of current fiscal restraints, accent would be to back up capacity constructing attempts of the exporters like productiveness sweetening programmes such as preparation installations to upgrade human resource accomplishments. o Diversification will be encouraged by proposals geared specifically to advance more trade in agricultural merchandises. In the fabrication sector this variegation policy will besides ease SMEs. o Exporters would be encouraged to better quality, cater to latest consumer penchants, comply with international criterions and obtain the relevant enfranchisement in this respect. o Continue with past trade policy steps that are turn outing valuable for increasing exports. In conformity with the scheme that I have merely outlined, a figure of new policy steps have been formulated to implement the scheme. o Impermanent Importing for Exports O Zero Rating of Exports o Development of Export Clusters o To ease exports to the Afghanistan states of Paktia ( Gardez ) and Khost, it has been decided that a imposts station at Pak-Afghan boundary line would be setup at an appropriate location. This will cut down transit cost & A ; bringing clip to this country from Pakistan.
IMPORT STRATEGY AND MEASURES
This twelvemonth our import scheme besides turn toing the job of the big trade spread is besides designed to ease those imports that will function to increase the fight of our exports and hence increase their over all quantum and value O In order to cut down cost of natural stuff imports and thereby do our export merchandises more competitory the import of Job batch & A ; Stock tonss of natural stuff, which attracts responsibility up to 5 % , would now be allowed. o Enlarge the list of importable points from India, which is based on the petitions of our stakeholders. Cheaper natural stuff sourced from India would do our exports more competitory in international market. Although the list is being issued individually, I may advert that we are leting import of Diesel and fuel oil from India, because it will be cheaper due to the difference in transit cost. This will besides assist us to turn to our planetary trade shortage. O Customs Duty on the import CNG Buses was brought from 15 % to zero in the Budget 2008-09 O In instance any Indian maker of CNG coachs makes a steadfast committedness to set up fabrication of such coachs in Pakistan, the Ministry of Commerce may supply particular dispensation for import of 10 coachs by route via Wahga from each possible investor as trial cargos.
PAKISTAN AND THE WTO
Pakistan is one of the laminitis Members of the WTO since 1995, and its predecessor organisation the GATT set up in 1948. We are following an export led growing scheme and as such market entree is of critical importance for our concerns. The addition in discriminatory agreements and free trade countries between some members is besides gnawing our market entree. Therefore in order to keep current markets and derive new 1s for our exportable goods and services we are dependent on the WTO to acquire duty and non duty barriers lowered on an MFN footing. Such MFN liberalisation efficaciously degrees the playing field for competitory providers.
Pakistan has been actively engaged in the Doha unit of ammunition of trade negotiations that were launched in the Qatari capital in November 2001. Competently named the “ Doha Development Agenda ” ( DDA ) , this unit of ammunition of trade negotiations has been concentrating on taking deformations in the universe agribusiness markets and achieving enhanced market entree for both merchandises and service suppliers from Pakistan.
Since 2001, there have two more ministerial conferences in Cancun in 2003 and Hong Kong in 2005 severally. There have been many ups and downs in the route to a successful decision to the Doha unit of ammunition that takes into history the myriad involvements of the developing rank. There was a dislocation of negotiations in the summer of 2006 which led many perceivers to be disbelieving of the full procedure. However, sustained attempts by the rank led to a partial recommencement of the negotiations in November 2006 and full recommencement since January 2007 after the one-year meeting of the World economic forum at Davos.
Trade POLICY REVIEW BY THE WTO
Pakistan ‘s economic growing has been impressive since its old Trade Policy Review in 2002 chiefly as a consequence of its comparatively unfastened trade and investing governments, sound macroeconomic policies and structural reforms that have besides contributed to take down unemployment and decreased poorness, harmonizing to a WTO Secretariat study on the trade policies and patterns of Pakistan
Trade liberalisation has resulted inter alia in noticeable betterments in imposts processs, the considerable decrease of duty protection and the broadening of the range of duty bindings, giving more predictability to the trade government. Despite these betterments, a complex duty construction remains in topographic point in some sectors. In add-on, the protection of Intellectual Property Rights has been strengthened.
The study besides notes that Pakistan still lags behind in export variegation still depending to a great extent on fabrics and vesture, which account for two tierces of the entire exports. This sector now faces stronger competition in major markets. Besides, State engagement in certain activities like technology and cardinal services persists.
Continued trade liberalisation and other productivity-boosting structural reforms to turn to constrictions, inordinate regulative controls and labour market rigidnesss would assist better Pakistan ‘s international fight and the chances for sustainable economic growing, harmonizing to the study.
EFFECTS OF TRADE LIBERALZATION ON GROWTH AND POVERTY
Both positive and negative effects are involved in the channels of transmittal. Trade liberalisation has had a poverty-reducing consequence through enhanced growing, productiveness and investing and through monetary value stableness. But it besides has entailed some costs, in peculiar costs related to financial accommodation, which have been poverty-increasing. The axe of lower revenue enhancement grosss ensuing from lower import revenue enhancements and control of the financial shortage fell on developing outgos. Not merely are such outgos straight pro-poor, but the employment chances that could hold been created as a effect of these outgos were besides foregone, adversely impacting the income of the hapless. With regard to income inequality, the grounds suggests that although trade liberalisation by itself leads to a little decrease in inequality, a rise in Foreign Direct Investment ( FDI ) appears to increase it.
This procedure of liberalisation puts Pakistan towards the center of a group of developing economic systems in Asia in footings of self-imposed limitations on trade through both duty and NTBs. In this group, Pakistan restricts its imports about every bit much as China and less than India, Malaysia, the Philippines, and Bangladesh, but more than Thailand, Turkey, Indonesia, Sri Lanka and Indonesia. However, in footings of barriers imposed by other states on a state ‘s exports, Pakistan is the state allowed the least market entree among the same group of developing states in Asia and besides ranks amid the highest among all states of the universe in being denied market entree.
CONCLUSION AND POLICY IMPLICATION
While trade liberalisation is regarded as promoting development by impacting development indexs in a desirable mode, it has non influenced the chosen indexs of poorness, income distribution, PGDP and employment in Pakistan as expected. Increased imports, handiness of inexpensive natural stuff and machinery under conditions of unrestricted trade on the one manus enhances production, while exports of manufactured goods on the other manus, led to the creative activity of extra employment chances in the state due chiefly to increase in demand for domestic goods.
Trade liberalisation has contributed to the accentuation of income inequality in the state. This may be attributed to the hapless public presentation of interceding factors in Pakistan. It may therefore be argued that trade liberalisation has non affected development favourably in Pakistan. It may non be the mistake of merely liberalisation policies themselves but besides of the interceding factors of our economic system. Some policy deductions are therefore suggested: O Since Pakistan is a labour abundant state, it should give precedence to the production and export of labour-intensive merchandises, such as fabrics. O For poorness relief the productivity-oriented attacks, with the possible to increase the income of the hapless by increasing their productiveness, should be encouraged. o Political stableness which is one of the most effectual factors of development should be promoted in the state. Improved political stableness has favourable deductions. In the last 50 old ages Pakistan has faced several alterations in authorities and accordingly alterations in economic policies. To better economic public presentation, the state should better political stableness. o Pakistan should better the public presentation of its mediating factors for trade liberalisation to be effectual in advancing growing and development. o Further decrease in trade barriers can heighten growing and cut down poorness in Pakistan under the right conditions. It is of import to hold other pro-investment policies in topographic point though, in order to take full advantage of this channel. O Increases in development outgos should be strictly pursued in order that the accommodation costs of trade liberalisation do non contradict the additions from trade. But budgeting for more development outgos is merely the first measure in this procedure. Delivery systems and supervising systems of these development spendings must besides be improved. o The development outgos should non mostly be financed through increased financial shortages otherwise the hard-earned macroeconomic stableness and credibleness will be put at hazard. Some outgo exchanging is required and revenue enhancements as a portion of GDP need to increase, including through such steps as revenue enhancement of agricultural income and services every bit good as of capital additions on stock and existent estate. O Attempts to better societal safety cyberspaces and accomplishment development and preparation strategies are needed to guard against the employment losingss in the passage period O For sustainability of exports, farther advancement in bettering establishments, pulling export-oriented FDI and developing new export markets is needed every bit good as doing a better instance for bettering market entree in bing markers. O Textile quota remotion represents a possible chance, but given stiff competition from China, India and others Pakistan ‘s international fight demands to better to take advantage of this.