Note: The advance written questions from WTO Members and the answers forwarded by the
delegation of Pakistan are reproduced in document WT/TPR/M/95/Add.1, and will be
available online at:  http://www.wto.or g/english/tratop_e/tpr_e/tp_rep_e.htm.WORLD TRADE
ORGANIZATIONWT/TPR/M/95
8 March 2002
(02-1172)
Trade Policy Review Body
23 and 25 January 2002Original:  English
TRADE POLICY REVIEW
PAKISTAN
Minutes of Meeting
Chairperson:  H.E. Mr. Pekka Huhtaniemi (Finland)
Page
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON 3II. OPENING STATEMENT BY THE REPRESENTATIVE OF PAKISTAN 4
III. STATEMENT BY THE DISCUSSANT 6
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY 8V. REPLIES BY THE REPRESENTATIVE OF PAKISTAN AND ADDITIONAL
COMMENTS 14
VI. CONCLUDING REMARKS BY THE CHAIRPERSON 18WT/TPR/M/95
Page 3
I. INTRODUCTORY REMARKS BY THE CHAIRPERSON
1. The second Trade Policy Review of Pakistan was held on 23 and 25 January 2002.  The
Chairperson welcomed the delegation from Pakistan, headed by Mr. Mirza Qamar Beg, Secretary,
Ministry of Commerce, as well as H.E. Mr. Munir Akram, Ambassador and Permanent
Representative to the WTO, and the discussant, H.E. Ms Halida Miljani (Indonesia).  As usual, thediscussant would speak in her personal capacity and, in accordance with established procedures, she
had circulated in advance an outline of the main issues she intended to raise (document
WT/TPR/D/74).
2. The Chairperson recalled the purpose of the Trade Policy Reviews and the main elements of
the procedures of the meeting.  The Report by the Government of Pakistan was contained in document
WT/TPR/G/95 and that of the WTO Secretariat in  document WT/TPR/S/95.  Copies of advance
written questions, submitted by Canada;  Hong Kong, China;  Malaysia;  Japan;  the European Union;Korea;  Norway;  India;  Thailand;  the United States;  and Switzerland, had been transmitted to the
delegation of Pakistan.  These questions and responses provided by the representative of Pakistan are
reproduced in WT/TPR/M/95/Add.1.
3. The Chairperson noted Pakistan's strong commitm ent to the principles of multilateralism and
non-discrimination.  Pakistan's cooperation in preparing the reports for the TPRB meeting, despite theserious spill-over effects of the conflict in neighbouring Afghanistan, was also a reflection of its
attachment to the TPR Mechanism and the principle of transparency.  Both reports highlighted the
major efforts made by Pakistan to liberalize its trade and investment regime.  The tariff was Pakistan's
main trade policy instrument;  the average applied MFN tariff rate had fallen from 56% in 1993/94 to
20.4% in 2001/02.  Moreover, under its 1997 invest ment policy, Pakistan had fully opened most
sectors of its economy to foreign direct investment with the result that its investment regime now
appeared to be amongst the most liberal in the region.  These liberalization efforts had been pursued
under extremely difficult economic, social, and political circumstances.WT/TPR/M/95
Page 4
II. OPENING STATEMENT BY THE REPRESENTATIVE OF PAKISTAN
4. The representative of Pakistan (Mr. Mirza Qamar Beg) highlighted the extraordinary events
and circumstances that had affected the preparation of his country's second Trade Policy Review.
These circumstances had, inter alia,  prevented sufficient interaction with the WTO Secretariat and
revealed Pakistan's capacity weaknesses.
5. Despite onerous domestic and external challenges, Pakistan had followed the advice given by
participants in its previous TPR to pursue its macroeconomic and structural reform programme.
Pakistan was convinced that it was in its own interest to liberalize and to give a more outward
orientation to its economy.  Economic indices were  clearly disturbing and revenue constraints were
quite telling, but Pakistan had persevered with its trade liberalization efforts to, inter alia,  lay the
foundations for a more efficient economy.  A more rigorous reform programme had been pursued for
the last two years.
6. With respect to the social aspects of the reform programme, human development and gender
issues were important.  Pakistan's Poverty Reduc tion and Growth Strategy focused strongly on human
development with emphasis on changes in literacy, participation, and drop-out rates.  The social safety
nets had been strengthened and an ambitious micro-finance programme had been launched to help
people, especially women and the rural populace, create self-employment opportunities.  Past neglectof women was being fast corrected and this endeavour had been reflected in stronger participation in
education and health as well as in civil society and national politics.
7. Unmistakable signs of stabilization were reflected in Pakistan's economic performance in
areas such as inflation, exchange rate stability, current account, trade deficit, foreign exchange
reserves, tax collection, and exports.  As a result, there had been an approval of a three-year PovertyReduction and Growth Fund (PRGF) and the Paris Club rescheduling of debt.  Nevertheless, the
events of 11 September 2001, developments in the region, and the global slowdown had highlighted
the fragility of Pakistan's economic achievements.
8. Turning to the trade policy regime he stated that, in the light of its level and stage of
development, Pakistan had made enormous progress on non-tariff barriers, quantitative restrictions,and trade facilitation.  There had been a large-scale reduction of tariff heights and dispersion.  The
maximum tariff of 30% was to be reduced by 5 percentage points in 2002.  The number of tariff rates
(or slabs) had been reduced to four, and the average rate (on the basis of collected duty) had come
down to 11%.  In the 2001 Budget customs duty was reduced on about 80% of the items (8-digit HS
code).  The number of exemptions that had a distortionary effect, had been drastically curtailed.  In
the textiles and clothing sector, applied rates were generally at par or close to bound rates.  The
Central Board of Revenue was no l onger competent to impose any regulatory duties.  The Customs
Valuation system had been revamped.  Cash margin requirements for imports had been abolished.  In
its tariff reduction exercise, Pakistan had largely followed the concertina method because of its greater
positive welfare implications.
9. Pakistan had tested its trade restrictiveness index against the various measurement indices
(e.g. the IMF index) and was quite encouraged by the results.  Pakistan had come out to be followinga moderate tariff policy and an open  policy on the basis of quantitative restrictions.  Although
Pakistan’s high tariff rates had traditionally been motivated by revenue considerations, it continued to
strive for a lower dependence on customs duties as a source of revenue, and several tax measures
were being taken to, inter alia,  shift to consumption taxes, minimize tax evasion and avoidance,
enhance transparency, and improve efficiency.  Pakistan intended to continue its efforts to make itstariff policy more open and to reduce the anti-export bias.WT/TPR/M/95
Page 5
10. Fundamental reforms to the export regime included:  rollback of export subsidies (including
rebates);  ISO 9000, export finance, and freight subsidies;  trade in agricultural products, regardless of
whether there was domestic shortage;  and increase in export-tax from 25% to 50%.
11. Under an Agriculture Sector Programme loan  with the Asian Development Bank, state
involvement in procurement, sale, import, and export was to be completely abolished.  For wheat theGovernment was to maintain a strategic reserve, and substitute untargeted subsidies with pro-poor
programmes.  Support prices would act merely as market reference prices and not as public
procurement prices.  It had also been decided to close and divest the Fertilizer Import Department.
12. Pakistan, a founding Member of the GATT, stood committed to the multilateral trading
system and to its obligations.  The transformation of its trade and economic policies needed a
supportive approach from its trading partners.  Pakistan's resolve to promote the objectives of the
WTO would be strengthened if its major trading partners took the lead in providing greater marketaccess.WT/TPR/M/95
Page 6
III. STATEMENT BY THE DISCUSSANT
13. The discussant (H.E. Ms Halida Miljani) noted Pakistan's moderate economic performance
and its negative effect on the GDP per capita, considerably lower than the period prior to the last
Review.  There had also been a marked rise in the incidence of poverty.
14. The weak economic performance was attributed to structural, economic, and political
difficulties as well as to natural factors such as drought.  Traditional support for loss-making
state-owned enterprises, combined with low economic  growth and a weak tax base had resulted in a
high level of total net public debt.  Heavy debt servicing hampered efforts to undertake essential
social expenditures, such as poverty eradication, health, education and infrastructure, as well as to
cope with the spillover effect of refugees from the war in Afghanistan.  The 1999 Comprehensive
Economic Revival Programme had been forcefully pursued and there were now visible signs of
economic stabilization in a number of areas as well as greater support from international financialinstitutions.  She asked how Pakistan envisaged further improving its fiscal situation and what
progress had been made in negotiations to obtain debt relief.
15. Pakistan had taken major steps to liberalize its trade and investment regimes putting greater
emphasis on market driven measures.  Trade policies had been based on the principles of
multilateralism and non-discrimination, thus indicating its strong commitment to the WTO process.Involvement in preferential and regional trade arrangements had been limited.  She asked the view of
the authorities on the future development of th e South Asian Association for Regional Cooperation
(SAARC), in light of Pakistan's membership in  the SAARC Preferential Trading Arrangement.
Pakistan had improved significantly the transparency of its complex trade-related framework and had
undertaken institutional changes to, inter alia,  improve policy coordination on WTO matters.
16. The tariff remained a main trade and fiscal policy instrument.  Despite reduction and
simplification, tariff protection was still relatively high on a few sensitive items.  The gap between
bound and applied rates had widened.  Tariff simpli fication had resulted in the breaching of WTO-
bindings on some 90 lines, but steps had been taken to address this issue.  In the light of the difficult
fiscal situation and the heavy reliance on tariffs for tax revenues, she sought comments from theauthorities on their difficulties in pursuing further tariff reductions.
17. Pakistan had further eliminated non-tariff barriers on several products.  Efforts had been made
to streamline customs clearance procedures and to implement the WTO Agreement on Customs
Valuation.  Restrictions on balance-of-payments grounds had been phased out ahead of schedule.
18. Pakistan had also liberalized its export regime, eliminated public sector monopolies enabling
full private sector participation.  Pakistan had allowed intra-trade in all agriculture products, a
signficant departure from traditional policies.  Pakistan still provided export assistance, such as dutyand sales tax concessions on imports used in the production of export items, income tax rebates, and
concessional export finance.  This support was largely linked to export-performance requirements.
Pakistan had, inter alia,  amended its legislation to implement obligations under the WTO Agreement
on Trade-Related Intellectual Property Rights.  She asked about measures to be taken in the coming
years to maintain trade policy reform.
19. She highlighted the openness of the investment regime.  Pakistan had made progress in
privatizing commercial banks, automobile plants, cement manufacturing plants, chemical and
fertilizer plants, power plants, and engineering units besides assorted smaller units.  She sought
information on the focus and scope of privatization plans for the near future.
20. Agriculture remained the backbone of Pakistan's economy.  However, it suffered from poor
productivity performance and Pakistan remained a major food importing country.  With the high level
of rural poverty, the sector was linked to the issue of achieving food security and rural development.WT/TPR/M/95
Page 7
Government support tended to be limited to "Green Box" measures.  Tariff protection and state
involvement in the trading of a few sensitive agricultural items had been reduced.
21. It was encouraging that the reduction of tariffs on imports of manufactured goods was the
result of the unilateral trade liberalization programme.  Import prohibitions on textiles and clothing
and chassis for trucks had been eliminated.  In the light of the impact of the slowdown in the global
economy to the textiles industry, she asked what policies Pakistan intended to pursue to help its textile
industry.  Pakistan had taken up commitments under the GATS and various steps to liberalize and
strengthen the services sector.  She enquired about plans for the liberalization of the services sector in
the near future.
22. She acknowledged Pakistan's strong commitment to the multilateral trading system despite
many economic and political difficulties.  Pakistan's long-term economic growth depended on the
willingness of trading partners to keep th eir markets open, and to open them further.WT/TPR/M/95
Page 8
IV. STATEMENTS BY MEMBERS OF THE TRADE POLICY REVIEW BODY
23. Members noted the structural, economic, and political difficulties that had led to declining
economic growth as well as the implementation of the Comprehensive Economic Revival Programme
of 1999.  Certain Members noted Pakistan's narrow tax base, the degree of state involvement in the
economy, and the narrow production/export base.  Members commended action taken by Pakistansince its last TPR to further liberalize and increase the transparency of its trade and investment
regimes.  Several Members expressed their appreciation for Pakistan's trade policies being based on
the principles of multilateralism and non-discrimination.  They also noted with satisfaction the
introduction of legislative and institutional changes in a number of WTO-related areas (safeguards,
anti-dumping and countervailing measures, intellectual property rights).  Members commended
Pakistan for its active participation in WTO work and its role in defending the interests of developing
countries.  Members also appreciated Pakistan's continued effort to simplify its tariff structure, and toreduce its applied tariff rates.  Nevertheless, several Members noted that tariff rates still varied
widely, only one third of tariff rates were bound, the widening gap between applied and bound rates,
and applied rates exceeding bound levels over more than 90 items.
24. The representative of Morocco noted the importance of and benefits deriving from a TPR.
Low economic growth had affected Pakistan's per capita income, thus increasing poverty.  The high
level of debt (external and domestic) and the lack of export product/market diversification were of
major concern to the authorities.
25. Like in many other developing countries, Pakistan's trade policy was not exempt from
criticism.  Inconsistencies and incoherence persisted.  The trade deficit had been reduced and this had
allowed Pakistan to lift progressively import restrictions for balance-of-payments purposes.  Hecommended Pakistan's determination to eliminate its export subsidies.  He also encouraged Pakistan
to intensify private sector participation in the economy, and to dismantle state monopolies.
26. Pakistan was a net food importing country and domestic support to agriculture observed WTO
commitments.  He commended reforms in the services sector.  Foreign investors and technical
personnel were not subject to work permit regulations, and visas were granted on a liberal basis, thusfacilitating the establishment of foreign investors and the movement of physical persons.
27. The representative of Canada noted that Pakistan had collaborated closely with the
international community to ensure the success of its reforms and had met IMF requirements for the
first time, thus qualifying for further assistance (Paris Club creditors, IMF Poverty Reduction and
Growth Facility).  He urged Pakistan to continue developing its physical and services infrastructures,
strengthening its education system, improving governance, and expediting and broadening the scope
of its privatization programme.
28. Reforms had helped Pakistan to reap the benefits of, and participate more fully in, the
multilateral trading system.  He highlighted the benefits from participation in regional initiatives and
encouraged Pakistan to increase its trade with, and to build stronger linkages among, the members of
the South Asian Association for Regional Cooperation (SAARC).
29. Predictability for domestic importers and foreign exporters could be improved by binding
more tariff lines and reducing the gap between bound and applied rates.  He encouraged Pakistan to
continue the review of its domestic legislation on government procurement, to update it, and ensure
transparency through publication of the laws and regulations as well as to ensure compliance with the
terms and conditions set for bidding.  Canada strongly encouraged Pakistan to ensure greater
adherence to established Intellectual Property Conventions, end calls for preferential treatment forPakistan exports, and to further eliminate agricultural subsidies.WT/TPR/M/95
Page 9
30. The representative of Norway  recalled the longstanding bilateral ties between his country and
Pakistan.  Norwegian assistance to Pakistan for education, good governance, human rights, and
poverty alleviation was to double to US$7 million in 2002.
31. He commended efforts to reduce dependence on customs tariffs for public revenue purposes
as well as the structural developments that were leading to a more sophisticated export base.  Heasked what the authorities were doing to facilitate  growth by diversifying exports.  He acknowledged
the merit of foreign facilitation efforts and expressed the hope that the ongoing negotiations on trade
in services would provide additional impetus to attracting foreign investors.
32. The representative of Hong Kong, China indicated developments in bilateral trade ties and
cooperation in the textiles and clothing issues with Pakistan.  He commended Pakistan for integrating
the entire textiles and clothing sector, which was now fully governed under GATT rules.  Hong Kong,
China shared the concern of Pakistan on the proliferation of regional trade agreements, and hoped thatthis could be satisfactorily addressed under the Doha Development Agenda (DDA).
33. Like many other developing countries, Pakistan faced capacity constraints in fulfilling some
of its WTO obligations;  the DDA was expected to strengthen capacity-building in developing
countries.  In supporting Pakistan's export diversification efforts, Hong Kong, China looked forward
to working closely with Pakistan and other Members in achieving further trade liberalization underthe DDA.
34. He encouraged Pakistan to narrow the marg in between applied and bound rates, and to make
further tariff commitments to enhance the certainty and predictability of market access for goods.
Pakistan had to further its efforts to enhance transparency in its trade procedures and regime, for
instance, in notifications concerning import licensing and technical barriers to trade.  It had also tokeep up the momentum in its efforts to privatize and liberalize its services sector.
35. The representative of Malaysia, on behalf of ASEAN Members, commended Pakistan for the
developments in its economic and trade policies as well as for addressing socio-economic imbalances.
He noted, inter alia,  achievements in the fiscal deficit, current account, privatization, and governance.
Pakistan had to remain on track in these reforms towards achieving sustainable growth and ensuring
better integration into the global economy.
36. Pakistan's trade policy objective was to reduce the anti-export bias by opening the economy to
international trade and FDI.  The gap between bound and applied rates reflected Pakistan's unilateral
actions to lower tariffs.  He encouraged Pakistan to further streamline the tariff regime, remove
regulatory duties (edible oil), correct tariffs exceeding bound rates (mostly regarding textiles and
clothing), reduce high import duties on cocoa products (ranging from 80% to 125%), remove the tariff
differential between palm oil and other vegetable oils, and repeal the sales tax on palm oil products,which was not levied on any other oils.  He commended Pakistan for the removal of the state
monopoly in trade, reduction in the negative list of imports, elimination of licensing or cash margin
requirements and the dismantling of quantitative re strictions.  ASEAN looked forward to the further
relaxation of restrictions that would promote grea ter foreign direct investment inflows into the
manufacturing and services sectors.
37. The representative of Japan recalled the bilateral political, economic cooperation, trade, and
investment ties between Pakistan and his country.  His country appreciated Pakistan's efforts to pursue
the Comprehensive Economic Revival Programme launched in 1999, and expressed the hope that
Pakistan would continue its efforts to steadily implement the Programme, both in the short and long
term.
38. He noted the ratio of total investment to GDP had been declining despite the 1997 opening-up
of most sectors to FDI, and expressed the view that a continued and successful implementation of theWT/TPR/M/95
Page 10
Revival Programme would improve investor's confidence.  He also mentioned that Pakistan had been
granted an extension of the transition period (until end December 2003) for eliminating its TRIMS
programme.  He sought detailed explanations on its plan for elimination.
39. He expressed the hope that Pakistan would expand the coverage of items under bound tariffs
and would reduce the gap between applied and bound rates by lowering the bound rates.  He alsohoped that additional efforts would be made to observe the bound level.
40. Although Pakistan was exempt from the prohibition to grant export subsidies, certain tax
exemptions for exports were classified as prohibited export subsidies and had to be notified to the
WTO Committee on Subsidies and Countervailing Measures.  He asked how Pakistan could explain
the consistency of the 1997-98 export subsidy for sugar with Article 9 of the WTO Agreement on
Agriculture.  He showed appreciation for Pakistan's various efforts to strengthen its intellectual
property rights, such as by deciding to join the Paris Convention for the Protection of IndustrialProperty and preparing the Legislation on Plant Breeders Rights, and also expressed the hope that
each process would be finalized as soon as possible.
41. The representative of the European Union noted that it was important to undertake a TPR of a
country at a time when it was going through very difficult political and economic times.  He asked for
further information on recent signs of economic stabilization as indicated by the authorities, andwhether, in their view, the IMF shared their assessment.  He sought more detail on steps aimed at
expanding the export base.  He asked what action had been or would be taken to address the fall in
imports of capital goods.  He enquired why imports of consumer goods had remained fairly constant
and whether the situation was expected to change in the next couple of years.  He asked whether there
was an assessment of how the emphasis on market-driven measures had resulted in concrete signs ofimprovement.
42. Pakistan was an important player in the region and in the multilateral sphere.  It was
important to count on each other's commitment to the WTO system, and substantive contribution in
the multilateral trade negotiations.  He expresse d confidence in deepening bilateral trade with
Pakistan.  He was convinced that Pakistan's open and favourable investment regime would further
encourage EU investment.  A third-generation bilateral cooperation agreement had been signed on
24 November 2001.  A number of measures had been pu t in place in favour of Pakistan by the EU in
the aftermath of the tragic events of 11 September 2001, including a comprehensive package with a
15% increase in quotas for textiles and clothing from Pakistan as well as additional preferences under
the GSP applicable to countries attempting to combat trade in dangerous drugs.
43. He asked whether Pakistan could provide a figure for the exact share of tax revenue
accounted for by customs tariffs;  and how the introduction of the General Sales Tax had affecteddependence on customs revenue.  He expressed concern over the prohibitively high level of tariffs on
automobiles, and asked why they were set at such a level and whether a reduction in rates was
envisaged in the near future.  His delegation was interested in knowing about Pakistan's experience
with the simplification of customs procedures, and whether this had broadened the amounts of duties
collected.  He sought further details on the type of items that remained on a negative list of importsand whether the authorities envisaged reducing it further, in particular for 192 items subject to health
and safety requirements;  and clarification of the ban on certain used machinery.
44. The EU had no doubt that Pakistan would further integrate itself into the global economy and
develop its economic performance provided it remained attached to WTO rules and commitments.
The EU was fully prepared to grant greater market access through GSP and other initiatives, includingtrade-related technical assistance.
45. The representative of Switzerland commended Pakistan for its wide ranging structural
reforms, but pointed out remaining structural weaknesses.  He acknowledged that, deep-rootedWT/TPR/M/95
Page 11
problems were not easy to solve in a short time-frame;   therefore, it was important to keep the current
policy on track for a sufficiently long period.
46. He commended Pakistan for its progress in tariff reductions and the elimination of balance-of-
payments restrictions as well as its debt-rescheduling and its opening to foreign investment.  The
continued implementation and enforcement of the WTO Agreements would rebuild investorconfidence.  He encouraged the authorities to proceed with narrowing the gap between applied and
bound rates as well as expanding the scope of bindings.  He welcomed Pakistan's intention to do away
with all export subsidies, explicit or otherwise.
47. The representative of Korea highlighted the mutually beneficial trade relations between
Pakistan and his country.  These trade relations would expand further as a result of the DDA.  He
noted Pakistan's firm determination to pursue its liberalization policies without flinching from the
risks emanating from its economic and political strain s.  Pakistan was on the right track in pursuit of
high economic performance in an ever-globalizing world.  Nevertheless, malfunctioning state-owned
enterprises appeared to be seriously hampering Paki stan's capacity to implement fiscal policies and to
boost economic growth and development.  This structural problem could be addressed with
accelerated privatization.  Sound implementation of a restructuring programme would bolster investor
confidence.
48. The representative of India recalled the challenges faced by the Pakistani economy as well as
the successful implementation of the Comprehensive Economic Revival Programme, which had
helped secure substantial multilateral support.  He sought details on plans for sustained economic
growth as well as for diversification of export products and markets.
49. His country shared the concern of Pakistan on the proliferation of regional trade agreements
and initiatives as well as their compatibility with the WTO rules so that non-parties were not
adversely affected.  At the first TPR of Pakistan, his country had noted that the full potential of
bilateral trade had not been realized as the basic GATT/WTO principle of MFN was not being applied
by Pakistan in its trade relations with India.  Denial of MFN status was inconsistent with the WTO
rules.  He urged the authorities to reconsider this matter without any further delay.
50. The representative of Thailand expressed his delegation's hope that, in spite of late
submission, Pakistan would be able to reply to  Thailand's written questions, including those on
Pakistan's tariff regime.
51. The representative of the United States recalled the bilateral trade and investment ties
between her country and Pakistan.  She commended Pakistan's steps toward economic stabilization,
integration into the international trading system, a nd the reduction of direct involvement of the State
in the economy.  The reform plan had been critical to the improvement in the fundamentals ofPakistan's economy, the elimination of balance-of-payments related measures ahead of schedule, and
the re-establishment of focus in key social sectors.  Efforts to reduce barriers to trade, and industrial
and export diversification were important objectives.  The continuation of the reform programme
would enhance investor confidence in Pakistan.  She encouraged a speed up of the privatization
process.
52. Several barriers to trade and investment still created potentially important distortions to
competition and, thus constituted potential impediments to Pakistan's long-term development.  She
was particularly concerned to learn that Pakistan appeared to be violating its tariff bindings although
the situation had apparently improved since 2000.  She sought a prompt correction of this situation.
She urged further reductions and encouraged Pakistan to take steps to address high tariffs and excisetaxes on autos, parts, and motorcycles to encourage investment in the sector.  More information was
sought on the degree of state involvement in the economy as well as the types of approvals and
restrictions, essentially licensing, that were required for imports.  She expressed disappointment thatWT/TPR/M/95
Page 12
Pakistan had not notified this information to the WTO.  She encouraged Pakistan to increase the
number of lines bound in its tariff schedule, and to narrow the spread between bound and applied
rates.
53. The representative of Colombia recalled that, in the International Office for Textiles and
Apparel, Pakistan and his country shared common interest in achieving better integration and better
access to major markets.  He noted the wide ranging changes in Pakistan's economic environment
since its last TPR.  He acknowledged Pakistan's progressive compliance with the WTO principles and
the obligations agreed upon with international financial institutions.  These steps were important in
view of the forthcoming trade negotiations and would allow for sustainable development/growth.  At
the same time, this would promote the rationali zation process that would raise productivity and
competitiveness.
54. The representative of Sri Lanka recalled his country's political, economic, and trade ties with
Pakistan, both members of the SAARC.  He appreciated the enormity of the challenges Pakistan had
had to face over the last two years, and positive developments in the trade and investment spheres,
despite the global slowdown.
55. Emphasis had been put on market driven measures, but tariff protection was still relatively
high especially for sensitive items.  A 30% customs duty on tea was very much higher than theaverage tariff level.  All imports were subject to a 15% sales tax on the duty-paid value.  The negative
list contained items subject to WTO-consistent public health, environmental, or national security
considerations.  Minimum cash margin requirements on the opening of all import letters of credit had
been eliminated.
56. In the light of Pakistan's narrow export base, he stated that greater market access to products
of export interest to developing countries, such as agricultural, textiles, and apparel products was
required.  Technical assistance to, inter alia,  increase productivity would assist export diversification.
The prosperity of many developing countries depended on their fuller integration into a healthy world
economy, and such prosperity in Pakistan would have positive effects in the region.
57. The representative of Honduras noted that, in spite of significant difficulties, Pakistan had
opted for market-oriented reforms.  Its economic programme was consistent with its growth and
developmental needs.  Pakistan was a good example of how developing countries assumed a high
degree of commitment within the multilateral trading system.  She encouraged Pakistan to continue in
this direction, thus ensuring its full integration into the global economy.
58. The representative of Guatemala indicated that Pakistan and her country had similar concerns.
Pakistan's main trade activities and employment were concentrated in agriculture, textiles, and
manufacturing, the most complex and distorted sectors in international trade.  The new round ofnegotiations would allow competitive countries to reap the opportunities of free trade, thus promoting
diversification and improving their living standards.  She urged Pakistan to pursue its reforms.
59. The representative of Kenya indicated that Pakistan was a leading source of rice supplies for
his country and encouraged it to exploit trading opportunities in Kenya (manufactures), thus
expanding its narrow export base.  He expressed the hope of exploring on a bilateral basis possibilitiesfor reducing the costs of conducting business (including phase-out of the fee for the attestation of
certificates of origin).  He commended Pakistan's bold steps to liberalize its trade and investment
regimes, either unilaterally or within the framework of multilateral commitments.  The continued
implementation of the reform programme woul d lead to a rebound in economic growth and
sustainable development.  Difficulties in implementing some aspects of the WTO commitments had tobe understood in the light of the high costs of creating institutional arrangements.  A recent study by
the World Bank had found that a country needed US$150 million to establish the institutional
framework necessary to implement the WTO TRIPS Agreement.  This amount far exceeded theWT/TPR/M/95
Page 13
budgets of some developing countries on other vital sectors, such as health and education.  His
country looked forward to collaborating further with Pakistan in the WTO work.
60. The representative of Mauritius recalled the longstanding bilateral relations between the two
countries as well as Pakistan's technical assistance to his country.  He noted that Pakistan's deep and
wide ranging structural reforms had resulted in the successful implementation of a stand-byarrangement with the IMF and subsequent substantial IMF support.  In the light of domestic realities
and weaknesses, he understood why it was necessary to temporarily restrict the export of wheat and
milled products for food security reasons.  He encouraged Pakistan to take further steps in the
direction of economic reform.  He thanked Pakistan for the dimension and insight it brought in both
formal and informal WTO meetings, and noted that the setting up of a WTO Council in Islamabad
would further enhance the Pakistani delegation's already high profile.  The rise in the number of
refugees constituted an additional burden on the economy;  thus support for Pakistan's efforts wasvery important at this time.
61. The representative of Cuba explained that distance had been a barrier to the development of
bilateral ties with Pakistan.  Her country was interested in strengthening trade relations with Pakistan
as well as in continuing pursuance of common inte rests within the WTO, where it remained a leader
on development issues.
62. The representative of Jamaica stated that despite the geographical distance separating the
two countries, Pakistan and his country shared a common interest, namely the strengthening of the
multilateral trading system.  In the light of considerable improvements in Pakistani policy, he hoped
that full support would be given by Pakistan's trading partners to enable it to meet challenges, such as
alleviating the burden of its debt, widening of it s export base, and the promotion of per capita GDP
growth.  Pakistan's commitment to the multilateral trading system was reflected in its active
leadership in the WTO work.
63. The representative of Uruguay commended Pakistan for having resisted protectionist pressure
and having opted for market-based reforms.  He also complimented Pakistan for its participation in
WTO activities as well as for liberalizing its trade and investment regimes, either on a unilateral basisor within the framework of its WTO commitments.WT/TPR/M/95
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V. REPLIES BY THE REPRESENTATIVE OF PAKISTAN AND ADDITIONAL
COMMENTS
64. The Chairperson invited the representative of Pakistan to focus his responses on three main
themes:  (i) economic environment;  (ii) trade policies and measures;  and (iii) sectorial policies and
measures.
65. The representative of Pakistan indicated that 131 questions had been addressed to its
delegation.  Replies would be given to all except four of them, for which replies would be given at a
later stage.
(i) Economic environment
66. The representative of Pakistan reiterated his country's tax revenue imperatives and efforts to
correct problems in the taxation system.  Specific measures had included a wider application of the
general sales tax (GST), a continuous reduction in the rates of custom duties, and the newlyintroduced Income Tax Ordinance 2001.  Pakistan expected to reduce high tax rates and the
multiplicity of taxes.  These efforts would contribute to greater revenue collection and a stronger shift
away from taxes on trade.
67. On export diversification and enhanced competitiveness, Pakistan's strategy consisted mainly
of: going up the value chain through proper supply-chain management and on-shore capacitydevelopment of the exporting enterprises;  a focused programme for the development of small and
medium-sized enterprises;  and a large-scale revamp of the physical and social infrastructure through
comprehensive human development measures and greater private sector role.  A sound
macroeconomic framework, market-based policies, and the curtailment of the role of the State would
yield positive results.  Regarding the terms of tr ade, he saw little chances for improvement in the
current global economic scenario.
68. Concerning debt rescheduling, the recently concluded Paris Club deliberations would provide
the much needed relief on debt servicing.  About a third of Pakistan's total outstanding external debt
was owed to Paris Club creditors.  Following this debt rescheduling, the Net Present Value of the
external debt was to decline by about 30%.  Fiscal space resulting from the rescheduling wouldenhance public expenditure on social sectors, poverty alleviation programmes, and physical
infrastructure.
69. Regarding the role of the State in the economy, he wondered whether its involvement was due
to commitment or compulsion.  Valiant efforts had b een made to curtail drastically the role of the
State in manufacturing and services (through divestiture, closure, and privatization).  In agriculture,
recent reforms to minimize the role of the State covered the irrigation system, support prices,
subsidized credit, and procurement and storage of grains.  Private sector participation was encouragedin the provision of physical infrastructure.  Efforts were being made to dismantle the state monopoly
in the railways sector.  Regulatory authorities were being set up in sectors such as petroleum and gas,
power generation, insurance, etc.  Price controls had been virtually eliminated, even in sensitive areas
(e.g. motor gasoline).
70. The Economic Revival Programme would help trade enhancement by placing it on a more
competitive basis.  Tariff reduction, withdrawal of subsidies, stable exchange rate, and an effective
elimination of rent-seeking opportunities would put  the fundamentals of trade endeavours on a more
firm and sustainable footing.  Reforms would induce greater foreign direct investment, particularly in
export-oriented enterprises.
71. Pakistan's favourable investment regime and the stability ensuing from reforms would raise
investor confidence.  Despite considerable progress, the privatization programme had fallen short ofWT/TPR/M/95
Page 15
expectations.  Narrow domestic capital and entrepreneurial base coupled with external factors, such as
sanctions, the enormity and complexity of the task , and the need for expertise had slowed down the
process.  Pakistan was pursuing it with renewed vigour.
72. He reiterated his country's unequivocal commitment to the multilateral trading system.
Pakistan had tried to honour its WTO commitments in letter and spirit, sometimes ahead of schedule,and if there had been any lapses, these had been due to capacity weaknesses rather than any intent to
bypass the WTO process.  Despite recent institutional measures (e.g. WTO Council, WTO cell in the
Ministry of Commerce, WTO focal points in ministries , collateral organizations in the universities and
the chambers), Pakistan was more than conscious of its capacity limits.  Thus, Pakistan was glad that
the capacity issue had figured prominently at the Doha Ministerial and looked forward to working
closely with the WTO Secretariat in the matter of capacity-building and technical assistance.
73. The discussant commended Pakistan's continued efforts for greater transparency and
predictability in finance, investment, and trade matters.  She appreciated Pakistan's commitment to
maintain the momentum of market-based reform, to  curtail of the role of the State in the economy,
and to meet its WTO obligations in letter and spirit.
(ii) Trade policies and measures
74. The representative of Pakistan recalled that his country had been pursuing trade facilitation in
cooperation with UNCTAD in the context of a World Bank funded trade facilitation project.  An
Import Policy and Procedure Order had been in force, and there had been an extensive demystifying
and debugging of the banking, customs, and port procedures.  Documentation requirements were
being minimized.  Although the registration of importers was a routine and automatic measure,
Pakistan would see whether it could eliminate this requirement.
75. Concerning the 91 eight-digit HS items where applied rates exceeded bound rates, he
explained that Pakistan's action to control tariff dispersion through four prescribed applied tariff rate
slabs had not coincided with the annually diminishing bound rates.  Pakistan had already notified to
the WTO new applied rates on about 80 of these items to become effective on 1 July 2002, and, on
most of these items the applied rates were to reach the final bound level three years ahead of schedule.For the remaining items, Pakistan proposed to take corrective measures at the time of the budget.
76. The maximum tariff rate was to be capped at 25% (except for automobiles and alcoholic
beverages) and the subsequent adjustment of the current four duty rate slabs (5%, 10%, 20%, and
30%) would be announced in the forthcoming budget, when the desirability of having zero duty as
one of slabs would be considered.
77. Pakistan had used regulatory duties in the past as anti-dumping levies in the absence of
anti-dumping legislation.  Regulatory duties were now applied only upon recommendation of theNational Tariff Commission and under prescribed pr ocedures including open hearings.  Pakistan was
rapidly dismantling the entire duty exemptions regime, and the remnants were expected to disappear.
78. Pakistan adhered to the MFN principle and its permitted exceptions.  The duty concessions
agreed to with the EU were applicable on an MFN basis, and tariff bindings had already been notified
to the WTO.
79. Although Pakistan had made a request for relaxation of rules in respect of a few items subject
to repeated malpractices, it continued to adhere to the provisions of the WTO Agreement on Customs
Valuation.  The principal function of the National Tariff Commission was now to handle the trade
remedy laws.  New legislation on safeguards, anti-dumping and countervailing was in conformity
with WTO provisions.WT/TPR/M/95
Page 16
80. He expressed concern on the allegation of import licensing, as there was no such requirement
in his country.  He proposed to discuss in detail and clarify this matter with the Secretariat.  It
appeared to involve confusion with compliance of certain health, safety, and other requirements.
Almost all standards, technical and SPS requirements in Pakistan were identical or similar to the
international ones, non-discriminatory and reasonably transparent.
81. Pakistan was not a signatory to the WTO Agreement on Government Procurement, but it
subscribed to the principle of fair competition and transparency.  Procurement procedures were
known, published in official manuals, and run by proper committees.  Price preferences for
domestically produced goods had been eliminated.  On trade-related investment measures (TRIMs),
Pakistan had accepted the decision of the WT O Council on Trade in Goods of November 2001.
82. He stressed the roll-back of subsidies on exports.  There was no subsidy on export finance.
Duty drawback rates had been rationalized on an input-output coefficient basis for which aprofessional body had been set up.  There were no freight subsidies or compensatory rebates.  Exports
were "zero rated", a well accepted principle duly recognized by the relevant WTO Agreements.
83. Pakistan had no doubt that proper enforcement of intellectual property rights was in its own
interest in view of the implications for investment and creativity.  Legislation on copyrights, trade
marks, patents and industrial design, and integrated circuits had been made WTO compliant.  Therewere plans for establishing a Pakistan intellectual property rights organization to bring under one
umbrella various agencies in this area.  Enforcement-related capacity weaknesses were to be corrected
in the shortest possible time.
84. The discussant welcomed Pakistan's intentions with respect to registration of importers,
customs valuation, and inconsistencies in binding rates.
85. The representative of Japan asked about the measures envisaged for implementing TRIMs
obligations.
86. The representative of India requested a prompt reply on the question of non-extension of
MFN status to his country.  He felt reassured by Pakistan's statement for implementing its WTO
commitments both in letter and spirit.  He also sought information on the outline of the tradefacilitation project, and of the role of UNCTAD, as referred to by the representative of Pakistan.
87. The representative of the United States recalled the late submission of his country's questions
and looked forward to replies.
88. The representative of Pakistan explained that the November 2001 decision on TRIMs
provided for an extension of the time period for implementing commitments until 2003.  As a result,
Pakistan did not intend to pursue alternative approaches on this matter.  With regard to the
non-application of MFN status, he reiterated that Pakistan's position was in conformity with GATTprinciples and Pakistan would give a written reply on this matter.  The trade facilitation project with
the WTO was at its early stages, and the reduction of documentation requirements was aimed at
creating a single import document.  Efforts were being made to work out a pre-clearance arrangement.
Work was under way with the banks for the adoption of the new import terms across the entire
banking system, and for tackling the difficulties of multi-mode transportation.  Efforts covered thebanking arrangements, ports, customs procedures, and inland transportation.  In the light of Pakistan's
level of development, it was difficult to bring about changes as fast as desired.  Concerning import
licencing, he was of the view that there had been a misunderstanding and Pakistan would work with
the Secretariat on this matter.
89. The representative of India considered that the non-extension of MFN status to his country
was not GATT-consistent and he looked forward to a written reply on this matter.WT/TPR/M/95
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(iii) Sectoral policies
90. The representative of Pakistan stated that agricultural sector reforms would focus on market
driven policies, curtailment of the role of the public sector, and pro-poor targeting of subsidies.
Export subsidies would remain within the ambit of the WTO Agreement on Agriculture.  There was
no state monopoly of trade in agricultural goods.  The role of the Trading Corporation of Pakistan inthe export of rice and cotton was insignificant, and its involvement was largely where the buyer
wished to deal with a public sector agency.  Intra-trade of agricultural products was to be allowed
regardless of the domestic supply (shortage, surplus) situation.
91. The intensity and speed of reforms in banking, telecommunications, and insurance had left his
authorities somewhat breathless.  The creation of regulatory authorities, promulgation of new laws,
and privatization were testing Pakistan's administrative and managerial capabilities to the hilt.
Pakistan had taken good note of the issues raised, and the suggestions made.  It undertook to take afresh look at its commitments under GATS, and try to be as liberal as its circumstances would
warrant.
92. The Chairperson asked for the reason for not discussing the manufacturing sector.
93. The representative of Pakistan replied that it was his understanding that responses on textiles
and clothing and the automobiles sectors as well as export diversification had been provided at the
discussion under the previous theme (MFN implemen tation of tariff arrangements with the EU,
TRIMs).
94. The discussant thanked Pakistan for the information provided on agriculture and services.
95. The representative of Japan sought clarification on the establishment of the Pakistani
Electronic Media Regulatory Authority (PEMRA).
96. The representative of Pakistan indicated that the legislation on the PEMRA would be
finalized soon (within three weeks from the date of the TPRB meeting) and it was to be operative in
three months (from the date of the TPRB meeting).
97. The Chairperson recalled that in telecommunica tions the greatest shortage in developing
countries was in the lack of regulators rather than technology.
98. The representative Pakistan stated that pa rticipation in the TPR had been a rewarding
experience.  He wondered whether Pakistan had done enough in terms of liberalization;  and whether
these liberalization efforts were sustainable.
99. Pakistan's comparative and competitive advantages were in textiles and agriculture, which
were facing strong access barriers in foreign markets.  Trade liberalization was beginning to erode its
domestic capacities in chemicals, engineering, electronics, and automotive products.  Political and
economic factors, including the dismantling of tariff walls, had led to decline in domestic and foreigndirect investment.  Market access was constrai ned by the proliferation of regional and other
preferential trading arrangements.
100. Economic success relied on a major export expansion provided that large investments were
made in sectors such as textiles, agricultural, and information technology.  He expected, inter alia,
that the TPR would induce major trading partners to support Pakistan's trade and investmentenvironment in a substantial manner.WT/TPR/M/95
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VI. CONCLUDING REMARKS BY THE CHAIRPERSON
101. This, the second Trade Policy Review of Pakistan, has been an open, frank and very useful
discussion of Pakistan's trade and related policies.  Our work has been greatly facilitated by the active
involvement of Secretary Beg and his delegation and by that of many Members.  We now have a far
better understanding by Members, and thus their collective evaluation, of Pakistan's trade andtrade-related policies as well as of planned changes therein.  The Review has also provided Members
with the opportunity to acknowledge the recent progress made by Pakistan and to express their strong
support for Pakistan's ongoing liberalization efforts.  The outcome, I believe, has been a highly
successful consideration of Pakistan's trade policies, practices, and measures
102. Members expressed appreciation for the continued, successful implementation of the
Economic Revival Programme that was launched to address Pakistan's economic and other
impediments to sustained, strong growth.  In th is context, they noted the major market-driven
measures adopted by Pakistan to liberalize its trade and investment regime;  they referred in particular
to the sharp cuts in and simplification of the customs tariff, Pakistan's main trade policy instrument,
and the fact that 100% foreign ownership is now allowed in most sectors of the economy.  However,
they also noted the narrowness of the tax base, th e impact of loss-making state-owned enterprises on
the economy as well as the reduction in state involvement and monopoly rights in certain areas;  theyencouraged a continuation of the privatization process.  In addition, Members noted the size of
Pakistan's external debt and voiced some concern over the persistently narrow production/export base
on the grounds that Pakistan's long-term growth depended on export diversification;  at the same time,
however, it was pointed out that such diversification depends in turn on Members' willingness to open
their markets further to Pakistan's exports.
103. Members noted Pakistan's strong commitment to the multilateral trading system and its
limited involvement in preferential and regional trade initiatives.  Members recalled Pakistan's active
role in defending developing-country interests within the WTO.  Despite difficulties and capacity
constraints, Pakistan had, by and large, honoured its WTO commitments and had undertaken
legislative and institutional reforms in this respec t.  Members praised efforts to improve transparency
in trade and investment areas as well as the introduction of trade facilitation measures.
104. While expressing their appreciation of past and forthcoming tariff reductions and
simplification, Members nevertheless voiced some worry over the persistence of high tariffs on a few
sensitive items, the limited coverage of tariff bindings in manufacturing, the breached bindings, for
which corrective steps are envisaged, and the widening gap between applied and bound rates,
although acknowledging that this widening gap was the consequence of Pakistan's unilateral tariff
cuts.  Certain Members noted Pakistan's heavy dependence on customs duties for tax revenues.Members congratulated Pakistan for, inter alia,  reducing the number of items on its negative list and
for phasing out restrictions on balance-of-payments grounds ahead of schedule.  Members recognized
Pakistan's efforts to strengthen protection of intellectual property rights.
105. On sectoral policies, certain Members expressed particular interest in and appreciation of
Pakistan's efforts to liberalize services and its undertakings under the GATS.  Pakistan wascommended for extending multilateral rules to the textiles and clothing sector.
106. Members also sought further clarification in a number of specific areas, including:
− WTO notifications and technical assistance;
− the application of MFN treatment;
− registration, customs valuation, and minimum (import) values;
− revised disciplines on the use of regulatory duties, and elimination of zero rate duties;
− government procurement (price preferences, bidding procedures, foreign suppliers);
− technical standards and SPS requirements;WT/TPR/M/95
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− export subsidies and export-processing zones;
− TRIMS and plans for their elimination
− adherence to intellectual property rights treaties and conventions;
− the Pakistan Intellectual Property Rights Organization;
− applied tariffs, subsidies, state involvement (rice, cotton), and export measures in agriculture;
− measures pertaining to textiles and clothing and the automobile sectors;  and
− deregulation, privatization, GATS commitments and MFN exemptions in financial services
and telecommunications.
107. The Pakistan delegation gave written and oral replies to questions posed by Members during
the Review, and undertook to provide responses at a later date on some outstanding matters.  The
replies provided have made a major contribution to this meeting, and were clearly appreciated by
Members.
108. In conclusion, through this Review we have gained appreciation of Pakistan's achievements
since the previous Review, and the challenges that lie ahead.  It is my sense that Members greatly
appreciate Pakistan's efforts to improve the fundamentals of its economy;  they encouraged it to
continue down this road in order to further improv e its prospects for sustainable economic growth and
social development.  Economic growth goes hand-in-hand with trade liberalization and other
modernization efforts, and Members invited Pakist an to count on the help of the international
community both to secure lasting institutional stability and to enhance its participation in the global
economy.
109. Purely as an aside, and as much a comment on the review process as on this Review, I was
struck by Secretary Beg's remarks that questions had given his delegation food for considerablethought and that sources of information had been f ound of which he was unaware.  This goes to the
heart of our work:  not only do we learn a lot about the Member, but often the Member learns a lot
about itself.  Moreover, this is put into a multilateral setting, thus serving to strengthen our system.
Increasingly our work highlights the value of the Trade Policy Review Body.
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