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PRESS/TPRB/1
8February 1995
TRADE POLICY REVIEW OFPAKISTAN
Pakistan 'seconomy hasgrown steadily overthepastdecades and,despite theconstraint of
arelatively weakinfrastructure, thecountry hastaken substantial stepstoopenitseconomy totheoutside
world. Tariff levels andnon-tariff protection measures havebeenreduced significantly ashasstate
intervention intrade, according toaWTO Secretariat report onPakistan 'stradepolicies andpractices.
Pakistan 'smedium-term trade policy programme includes further liberalization ofthetrade
andexchange system and,during theperiod 1994-97, tariffratesandother taxesoninternational trade
aretobecutsubstantially. "Import liberalization isexpected toincrease competition between imports
anddomestic production andcontribute tomore efficient resource allocation andthedevelopment of
amore efficient export sector," saysthereport.
Inspiteoftherecent tariff reductions, Pakistan isstillahigh-tariff economy. Atpresent, says
thereport, "thesimple average ofstatutory dutyratesis50percent, withthehighest standard tariff
rateof70percent. Tariff escalation issubstantial inareas suchasfood, textiles, leather, paper and
petroleum." Pakistan actively participated intheUruguay Round negotiations asadeveloping country
withaverysubstantial interest inthetextile andclothing sector. While thecountry hadonlyavery
small number oftariff bindings before theUruguay Round, Pakistan isnowtobindabout 33percent
ofitstariff linesand81percentofitstariffs foragricultural products. Most agricultural products
willhaveceiling ratesof100percent. Intheindustrial sector, Pakistan willbind25percentofits
tariffs, mostatceiling ratesof40to50percent.Attheendoftheimplementation ofthetariff reform
programme scheduled for1997, thetariff structure isexpected toimprove notonlybecause thestill
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hightaxes oninternational tradewillbereduced, butalsobecause offurther simplification ofthetariff
structure through theelimination ofmost tariff exemptions.
While Pakistan hasmade progress ineliminating orreducing non-tariff barriers totrade such
asimport licensing requirements, other non-tariff measures continue toapply toproducts whose import
isbanned forreligious, health, safety, security orother reasons.
Thescope ofstatetrading hasbeenreduced substantially. Thereport saysthatcurrently, the
Trading Corporation ofPakistan doesnotseem tohaveanyexclusive orspecial trade privileges but
thatthestate-owned RiceMarket Corporation andtheCotton Export Corporation "still enjoy some
inherited advantages overtheirprivate competitors, despite thefactthattheydonotenjoy exclusive
rights." Exports ofrawcotton andricearesubject toexport taxes, either forrevenue reasons orto
serve asadisincentive toexporting rawmaterials. Thescope ofsuchtaxes, however, hasbeenreduced
inrecent years.
Inconclusion, thereport saysthatPakistan 'seconomy isvulnerable toexternal tradebarriers
andthatthetextile andclothing sector, itsmainexport, hasbeensubject toarestrictive trade regime
-intheform oftheMulti-fibre Arrangement -fordecades. "Pakistan haspaidahighprice interms
ofexport losses forthisderogation fromtheGATT discipline. Itisthusveryimportant thatPakistan 's
trading partners assume theirresponsibilities" andimplement theresults oftheUruguay Round. The
report saysthatbyestablishing afavourable trading environment, Pakistan willbefurther motivated
tocontinue itstrade reform andoverall liberalization.
Notes toEditors
1. TheWTO Secretariat 'sreport, together withareport prepared bytheGovernment ofPakistan
willbediscussed bytheWTO Trade Policy Review Body (TPRB) on15and16February 1995. The
review ofPakistan iscarried overfromthe1994programme oftradepolicy reviews. Thereview will
beajointmeeting oftheTPRB andtheGATT 1947Council. Thisisthefirstreview ofPakistan since
thelaunching ofthetrade policy reviews inDecember 1989.
2. TheWTO Trade Policy Review Body conducts acollective evaluation ofthefullrange oftrade
policies andpractices ofeachWTO member atregular periodic intervals andmonitors significant trends
anddevelopments which mayhaveanimpact ontheglobal trading system.
3. Thetworeports,togetherwitharecordoftheTPRB'sdiscussionandoftheChairman'ssumming
up,willbepublished induecourse asthecomplete tradepolicy review ofPakistan andwillbeavailable
from theWTO Secretariat, Centre William, Rappard, 154ruedeLausanne, 1211 Geneva 21.
4. Thereports cover developments inallaspects ofPakistan 'strade policies, including domestic
lawsandregulations, theinstitutional framework, trade-related developments inthemonetary and
financial sphere, trade practices bymeasure andtrade policies bysector. Attached arethesummary
observations fromtheSecretariat 'sreport. Fullreports willbeavailable forjournalists fromtheWTO
Secretariat onrequest.
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5. Since December 1989, thefollowing reports havebeencompleted: Argentina (1992), Australia
(1989 &1994), Austria (1992), Bangladesh (1992), Bolivia (1993), Brazil (1992), Cameroon (1995),
Canada(1990,1992&1994),Chile(1991),Colombia(1990),Egypt(1992),theEuropeanCommunities
(1991 &1993), Finland (1992), Ghana (1992), Hong Kong (1990 &1994), Hungary (1991), Iceland
(1994), India (1993), Indonesia (1991 and1994), Japan (1990 &1992), Kenya (1993), Korea, Rep.
of(1992), Macau (1994), Malaysia (1993), Mexico (1993), Morocco (1989), NewZealand (1990),
Nigeria (1991), Norway (1991), Peru(1994), thePhilippines (1993), Poland (1993), Romania (1992),
Senegal (1994), Singapore (1992), South Africa (1993), Sweden (1990 &1994), Switzerland (1991),
Thailand (1991), Tunisia (1994), Turkey (1994), theUnited States (1989, 1992 &1994), Uruguay
(1992) andZimbabwe (1994).
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TRADE POLICY REVIEW BODY
PAKISTAN
Report bytheSecretariat -Summary Observations
Pakistan'seconomyhasgrownsteadilyoverthepastdecades,despitetheconstraintofarelatively
weak infrastructure. Nevertheless, inthe1980s, anumber ofstructural weaknesses undermined the
sustainability ofgrowth andheightened Pakistan 'svulnerability toexternal shocks. Toaddress these
constraints andattain stable, sustained growth withfinancial stability, Pakistan initiated acomprehensive
macroeconomicandstructuralreformprogramme,includingmeasurestoliberalizebothdomesticactivity
andthepayments system.
Since theintroduction ofthisprogramme, Pakistan hasmade substantial stepstowards greater
reliance onmarket forces andopening itseconomy totheoutside world. Thelevels oftariff andnon-
tariffprotection, andofstateintervention intrade, havebeenreduced significantly. Thisnewdirection
isinsharp contrast withPakistan 'sprevious economic policies, which werecharacterized byimport-
substitution andwidespread stateintervention ineconomic life.
Thebeginning ofthereform process wasaccompanied byincreasing domestic andexternal
imbalances. Thefiscal deficit widened anddomestic liquidity expanded, contributing tohigher inflation.
The1990-91 Middle Eastcrisis putadditional pressure onPakistan 'sexternal current account position.
In1992/93, Pakistan wasaffected bywidespread floods andplant diseases. Thegrowth rateofGDP
declined to2.3percent,exports stagnated, thecurrent account deficit widened to7.1percentofGDP
andgross official exchange reserves declined toacritically lowlevel bymid-1993. In1993/94, in
response tocontinuing domestic andexternal imbalances, Pakistan intensified itsmedium term(1993/94-
1996/97) adjustment andstructural reforms. These areaimed atsustaining annual economic growth
atabout 7.0percentovertheperiod 1993/94 to1996/97; reducing inflation to6percentbytheend
oftheperiod; raising official reserves tooverthree months ofimports; andreducing theburden of
domestic andexternal debt.
Pakistan inWorld Trade
Largelyasaconsequenceoftheinward-lookingtradepolicythatPakistanfolloweduntilrecently,
thecountry 'sparticipation inworld tradeisverysmall (0.2percentin1992). Theshare ofmerchandise
exports inGDPwas13percentin1992/93, while thatofmerchandise imports was19percent. Intra-
industry trade (IIT) ratescalculated fortheperiod 1990-92 indicate alowandevendeclining level
ofIIT,reflecting onceagain theisolated andprotected nature ofPakistan 'seconomy.
Aparticular feature ofPakistan 'sexports istheheavy dependence onproducts belonging to
thecotton group. Cotton andcotton based manufactures account forabout 60percentofmerchandise
exports. Other significant exports include leather products, rice, fishandcarpets. Thehighly
concentrated export structure hasmade thecountry 'strade vulnerable toexternal distortions and
restrictions, andinparticular torestraints under theMFA. Machinery, chemicals, petroleum and
petroleum products, transport equipment andedible oilsarethemajor import items; since 1980, the
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share ofmachinery, automotive products, telecommunication apparatus andoffice machinery has
increased rapidly.
Pakistan 'slargest trading partner inbothexports andimports istheEuropean Union, with
ashare ofclose to30percent, followed bytheUnited States, Japan andHong Kong. Theshares
ofNorth America andAsiainexports hasincreased inrecent years, while those ofeastern Europe,
therepublics oftheformer Soviet Union andtheMiddle Easthavedeclined. Inthelastfewyears,
theshares ofimports from AsiaandtheMiddle Easthaveincreased, while those ofNorth America
havefallen.
Institutional Framework
TheIslamic Republic ofPakistan hasafederal structure composed offourprovinces, thefederal
capital andthe"tribal areas" under federal administration. Pakistan isaparliamentary democracy under
its1973 Constitution. ThePresident, whomustbeaMuslim, istheheadofStateandrepresents the
unity oftheRepublic; heorsheiselected atajointsitting oftheFederal Legislature foratermof
fiveyears.
TheFederal Legislature consists ofalower andupper house. Thelower house, theNational
Assembly, contains 307members elected directly plustenmembers whorepresent minorities; the
termofelection isfiveyears. Theupper house, theSenate, has87members whoserve forsixyears.
Matters ontheFederal Legislative Listareunder theexclusive authority oftheFederal legislature.
Inrespect ofmatters onConcurrent Legislative List,boththeFederal Legislature andtheprovincial
assemblies havetherighttolegislate. Matters notreferred toineither list,maybesubject tolaws
made byaprovincial assembly; however, whenever anyprovision ofanactofaprovisional assembly
contradicts anActofParliament, thecorresponding provisions oftheactoftheprovincial assembly
arevoid. Itistheunderstanding oftheSecretariat thattradematters areunder thelegislative authority
oftheFederal Legislature. Money billsmust originate intheNational Assembly; other billsmay
originate ineither house oftheFederal Legislature. Abillmustbepassed bybothhouses andthen
beapproved bythePresident. TheCouncil ofCommon Interest, which isresponsible totheFederal
Legislature, provides aforum fordecision onmatters ofmutual interest forboththeprovinces and
theFederal authorities.
ThePrime Minister, whoistheheadoftheFederal Government, iselected bytheNational
Assembly.TheformulationoftradepolicyisundertheexclusivejurisdictionoftheFederalGovernment.
Within theGovernment, theMinistry ofCommerce isresponsible foralltrade policy matters. The
implementation oftrade policy, beyond theMinistry ofCommerce, isthetaskoftheCentral Board
ofRevenue andCustoms. Other agencies withtrade-related powers include theMinistries ofFinance
andEconomic Affairs; Food, Agriculture andCooperatives; Industries; Petroleum andNatural
Resources; Planning andDevelopment; theStateBankofPakistan; andthePakistan Standards Institute.
Theauthorities enjoy widediscretionary powers, especially intariff andtax-related matters,
where anumber ofadministrative decisions giveexemptions andconcessions from general rules in
respect ofanumber ofspecific items ortraders.
TheNational Economic Council (NEC), headed bytheprime Minister, isthesupreme economic
policy making body. TheNEC reviews overall economic conditions andapproves allmajor economic
andsocial plans. TheEconomic Coordination Committee oftheCabinet (ECC), headed bytheFederal
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Minister ofFinance, deals withday-to-day matters andcoordinates theeconomic policies initiated by
government agencies.
TheNational Tariff Commission advises theGovernment ontariff protection andother forms
ofassistance. Tointeract withotherministries andtheprivate sector intradepolicy matters, theMinistry
ofCommerce hassetupanAdvisory Council, inwhich theprivate sector isrepresented bythe
Federation ofPakistan Chambers ofCommerce andIndustry andRegional Chambers Associations.
InPakistan, allimporters andexporters must bemembers ofaprofessional trade, commercial or
industrial association.
Trade Policy Features andTrends
Pakistan 'seconomic andtrade policies areestablished initsindicative five-year plans. The
current Eighth Plan(1993-1998) projects annual, average realGDP growth at7percent,withplanned
annual average increase inexport volume ofnearly 11percent, principally inhigher value-added
textile products, lightandmedium engineering goods andsport andsurgical goods. Other objectives
oftheplaninclude limiting import growth to5percentperannum inrealterms andaconsequent
reduction ofthecurrent account deficit from4.2percentofGDPin1992/93 to2.4percentin1997/98.
Theauthorities expect thistobeachieved, interalia,byincreased domestic production ofconsumer
goods. Care willneed tobetaken thattheobjectives aremetbymarket forces rather thanby
administrative means, including border measures.
Pakistan 'smedium-term trade policy programme includes further liberalization ofthetrade
andexchange system. Intheframework ofathree yeartariff reform (1994/97), tariff ratesandother
taxes oninternational trade willbecutsubstantially andthenumber ofproducts ontheNegative List
willbefurther reduced. Import liberalization isexpected toincrease competition between imports
anddomestic production andcontribute tomore efficient resource allocation andthedevelopment of
amore efficient export sector.
Pakistan isnotamember ofanyfree-trade agreements. Tariffs areapplied almost exclusively
onanm.f.n. basis, although preferences areextended onarelatively small number ofproducts tocertain
developing countries intheframework oftheGATT Protocol relating toTrade Negotiations among
Developing Countries. Pakistan, together withIranandTurkey, isamember oftheEconomic
Cooperation Organization andgrants a10percentdutyreduction on16products.
TheEuropean Union and15other trading partners grant GSPtariff treatment toPakistan 's
exports. In1992/93, 43percentofPakistan 'sexports received preferential treatment under GSP
schemes. Inthisregard, textiles andclothing areamong themostsensitive areas ofGSPtreatment,
wholly orpartially excluded inanumber ofcountries.
Recent evolution
Pakistan hasrecognized thatthehighprotection given tothedomestic economy hasinsulated
thecountry from foreign competition, generated astrong anti-export biasinresource allocation and
increasedinefficiency,wasteanddeclineofquality.Asaresult,Pakistan'sexportstructurehasremained
over-concentrated onasmall number ofagriculture-based products; inmore sophisticated product
areas thecountry 'sexport structure hasbeeninternationally uncompetitive.
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Recent trade-related reforms include thereduction oftheNegative Listfrom300to75items
between 1988 and1994; acutintheaverage statutory tariff ratefrom77to50percentwithfurther
reduction toamaximum of35percentby1997; theintegration of"para-tariffs" intothesingle tariff
ratebymid-1994; reduction, followed byelimination ofimport licensing andtheRestricted List;
liberalization oftheforeign investment régime andabolition ofindustrial licensing.
Pakistan wasanactive participant intheUruguay Round, with themajor objective of
strengtheningthemultilateraltradingsystem,phasingouttheMultifibreArrangement(MFA),integrating
thetextile andclothing sector intotheGATT, bringing agriculture fullyunder GATT disciplines and
providing special anddifferential treatment todeveloping countries andtheelaboration ofan"equitable
agreement fortrade inservices". Pakistan found theresults oftheUruguay Round "discouraging"
mainly duetolessthanaverage tariff reductions initsmain export product areas andtheslowspeed
oftheintegration ofthetextile sector intotheGATT.
Type andincidence oftrade policy instruments
Despite substantial tariff reductions inrecent years, Pakistan isstillahigh-tariff economy.
Atpresent, thesimple average ofstatutory dutyratesis50percentwiththehighest standard tariff
rateof70percent. Tariff escalation issubstantial inareas suchasfood, textiles, leather, andpaper,
petroleum.
Inthe1994/95 Budget year, the6percentimport fee,the5percentIqrasurcharge and
regulatory duties havebeenintegrated intoasingle customs tariff. Nevertheless, thetariff system is
stillnottransparent, asnumerous, mostly time-bound, exemptions andconcessions areapplied under
thesystem ofSpecial Regulatory Orders (S.R.Os). Asaconsequence, different ratesarefrequently
applied tothesame product andapplied ratesaresubstantially lower thanstatutory duties. Thetariff
reformprogramme,tobeimplementedbetween1994and1997,isexpectedtoimprovethetariffstructure
notonlythroughreducingthestillhightaxesoninternationaltrade,butalsothroughfurthersimplification
ofthetariff structure through elimination ofmost tariff exemptions andconcessions.
Pakistan hadonlyaverysmall number oftariff bindings before theUruguay Round. Under
theUruguay Round, thecountry istobindabout 33percentofitstarifflines, 81percentofitstariffs
inHSchapters 1-24(94percentofagricultural products asdefined intheUruguay Round) and
25percentoftariffs inchapters 25-97.
Pakistan didnotsigntheTokyo Round Customs Valuation Code, duetoitsperceived difficulties
inimplementing the"transaction value" concept oftheCode incircumstances when falseinvoicing
andcheating onimports constituted aserious problem. Thevaluation ofimported goods ismade through
comparing declared values withprices published regularly intheofficial Valuation Manual; thiscan
complicate customs clearance procedure andleadtoalackoftransparency andgreater administrative
discretion inthesystem. Smuggling issubstantial, partly duetohightariffs. Itisexpected thatthe
implementation oftariff reforms willleadtoadecline ofthisillegal activity. Byaccepting theresults
oftheUruguay Round, Pakistan iscommitted toadopting thevaluation methods specified inthe
Agreement.
Until recently, import prohibitions, import licensing andother non-tariff measures were
extensivelyusedtocontrolimportflows.Inthelastseveralyears,Pakistanhasmadesubstantialprogress
ineliminating orreducing non-tariff barriers totrade. Thenumber oftarifflinesincluded intheNegative
Listhasbeenreduced from300to75(whose importation isprohibited, unless specifically authorized).
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Thescope ofimport licensing wasreduced thencompletely eliminated in1993. TheImport Policy
Order, 1994, hasalsoabolished theRestricted List,products onwhich wereimportable onlythrough
designated importers. Until mid-1994, certain products (agricultural tractors andsome motor vehicles
inCBU condition) weresubject tostandardization requirements, which meant thatonlysome specified
makes wereimportable; thisrestriction hasalsobeenabolished, ashaveimport quotas onmachinery
andmillwork.
However, Pakistan stillapplies asubstantial number ofnon-tariff measures. TheNegative
Listincludes notonlyproducts whose import isbanned forreligious, health orsafety reasons, butalso
goods suchastextile andclothing items, which arerestricted, asstated bytheauthorities, forbalance-of-
payments reasons. According tothePakistani authorities, items ontheNegative Listcanbeimported
interms oftherelevant provisions oftheImport Policy Order. However, theSecretariat isnotaware
ofthecountry 'spractice inthisrespect anditisnotclear, given thatimport licensing hasbeenabolished,
whatinstruments areusedtoauthorize imports ofitems which areontheNegative List.Other non-tariff
measures applied toimports include various health, safety andprocedural requirements, motivated
mainly bysafety, health andsecurity considerations. Allimports from India areprohibited, unless
authorized byspecific legislation.
Thescope ofState-trading hasbeenreduced substantially. Currently theTrading Corporation
ofPakistan, doesnotseemtohaveanyexclusive orspecial tradeprivileges. However, thestate-owned
RiceMarket Corporation andtheCotton Export Corporation stillenjoy some inherited advantages
overtheirprivate competitors, despite thefactthattheydonotenjoy exclusive trade rights.
GovernmentprocurementpoliciesandpracticesofPakistanarenotfullyknowntotheSecretariat.
Therelevant rulesinforceclearly favour domestic sources overforeign ones. Theauthorities, however,
statethatrecently thepractice haschanged andnopreferences aregiven tolocalproduction.
Pakistan makes efforts tobaseitsstandards oninternational norms. National standards on
asmall number ofitems areinferior tointernational norms duetothedomestic non-availability ofthe
required technology. Pakistan standards donotseem toconstitute amajor impediment totrade.
Anumber ofmajor competitive export products ofthecountry, suchasrawcotton andrice,
aresubject toexport taxes, either forrevenue reasons ortoserve asdisincentive toexporting raw
materials. However, thescope ofsuchtaxes hasbeenreduced inrecent years. Some agricultural
products bearexport restrictions, toensure adequate internal supply. Exports oftextiles andclothing
tocountries withwhich Pakistan hasconcluded bilateral restraint agreement under theMFA, aresubject
toexport quotas.
Pakistan provides export incentives mainly intheform ofcompensation toexports byduty
andtaxconcessions, dutyfreestatus, export processing zones andbonded warehousing. Import
liberalization isconsidered asthemain vehicle forpromoting exports anddiversifying theproduct
structure. About halfofPakistan 'sexports benefit fromconcessionary credits; although statesubsidies
arenotinvolved, theexport finance system isdesigned inawaythatputstheburden ofsuchcredits
onthenon-export sector. Taxexemptions onincome originating fromexports arealsowidely available.
During thefirstfourdecades ofPakistan 'shistory, import-substituting industrialization was
financed from resources transferred from agriculture. Domestic prices ofagricultural rawmaterials
andfoodwere keptlowandtheurban population received generous subsidies. Inrecent years, the
degree ofstateintervention hasbeenreduced, agricultural prices havebeenbrought closer toworld
MOREPRESS/TPRB/1
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market levels andrevenue transfer from agriculture toindustry hasbeendiminished. Nevertheless,
available Producer Subsidy Equivalent calculations, based on1986-90 data, indicate thatPSEs were
negative forPakistan 'smajor export crops suchascotton andbasmati rice. Thisfactshowed that
government policies werestillbiased against agriculture; inputsubsidies toagricultural producers were
more thanoffset bythetaxing effect ofother agriculture-related policy instruments. Themajor goals
oftheNational Agricultural Policy, adopted inMay1991, include theestablishment ofsocial equity,
selfreliance, export orientation, sustainability andenhanced productivity.
Pakistan places special emphasis onindustrialization. TheGovernment gives importance to
private investment inhigh-technology, value added andexport industries; support forindustrial
development include taxconcessions, exemption fromcustoms duty, import andmonetary incentives.
Development ofengineering industries issupported byanon-compulsory "deletion" programme, with
incentives forencouraging localcontent; onceanentrepreneur hasagreed toadeletion programme,
fiscal penalties canbeimposed fornon-compliance.
Policies affecting industry havechanged substantially since 1988. Over 100enterprises have
beenprivatized andthedegree ofStateintervention inindustrial matters hasbeenreduced. Industrial
licensing hasbeenabolished, except inasmall number sectors andforeign investment policy hasbecome
more liberal. Theinsulation ofPakistan 'sindustry from therestoftheworld hasdiminished, but
industry stillremains protected byhightariffs andsome other measures.
Temporary measures
AlthoughPakistan'slegislationauthorizesanti-dumpingorcountervailingduties,nosuchmeasures
haveeverbeenimposed. Todateonlyoneapplication foranti-dumping action hasbeenreviewed by
theCommission, onimports ofjutefrom Bangladesh. [hefullimplementation ofthepresent tariff
reform andtradeliberalization programme islikely toexpose anumber ofdomestic producers toexternal
competition; thatmaybring anincreased number ofapplications foranti-dumping orcountervailing
actions. Pakistan isasignatory toboththeAnti-Dumping andtheSubsidies Code. Pakistan doesnot
haveseparate safeguard legislation andithasnever taken safeguard actions.
Newinitiatives
Recently, theGovernment ofPakistan hasintensified thereform ofitstrade system withthe
objective toenhance itseffectiveness andexport capabilities through increased market orientation and
competition withforeign goods andservices. Asnoted, para-tariff measures havebeenintegrated into
thecustoms dutyandattheendoftheimplementation ofthetariff reform programme in1997, the
highest tariff rateswillbereduced to35percentandmosttariff concessions andexemptions willbe
phased out. Itisalsoexpected thatthenumber ofitems ontheNegative Listwillbereduced
substantially.
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Trade Policies andForeign Trading Partners
With itscomprehensive macroeconomic andstructural reform programme introduced since
1988, Pakistan hasmade thefirstsubstantial steps towards reversing thecountry 'sinward-looking,
isolationist policies andgreater integration intotheworld economy. These reforms, ifconsistently
implemented, andaccompanied byappropriate macroeconomic andsocial measures, willleadtomore
efficient resource allocation, diversified economic development andincreased competitiveness of
Pakistan 'seconomy onbothdomestic andforeign markets.
Pakistan 'strade measures areapplied basically onanon-discriminatory basis; itsigned the
Tokyo Round codes withtheexception oftheCustoms Valuation andtheGovernment Procurement
Codes. Under theUruguay Round, Pakistan hasaccepted alltheMultilateral Trade Agreements;
however, thelowproportion oftariffratesbound byPakistan, evenaftertheUruguay Round, indicates
thatitsgrowing integration intothetrading system currently underway willcontinue tobegradual.
Pakistan isadeveloping country, whose economy isvulnerable toexternal trade barriers.
Aparticular feature ofPakistan 'seconomy isthatitsleading export product group, textiles andclothing,
hasbeensubject toarestrictive trade régime fordecades. Pakistan haspaidahighprice interms of
export losses forthisderogation fromtheGATT discipline. Forthisreason, Pakistan isdeeply interested
intheintegration ofthetextile sector, asexport opportunities inthisproduct areahaveadirect and
substantial influence onthecountry 'seconomic growth. Itisthusveryimportant thatPakistan 'strading
partners assume theirresponsibilities through theratification andconsistent implementation ofthe
Uruguay Round results, inestablishing afavourable trading environment thatmotivate Pakistan to
continue anddeepen itstrade reform andliberalization.
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TRADE POLICY REVIEW BODY
PAKISTAN
Report bytheGovernment -Summary Extracts
Pakistan 'stradepolicy isformulated withtheaimofmaximising gains frominternational trade
through thepromotion offreer trade inthecontext ofaglobal multilateral trading system, andthe
encouragement ofefficient andcompetitive domestic production activities. Afreeandcompetitive
trading andproduction environment willcontribute totheeconomic andsocial development ofPakistan.
Towards thisend,theGovernment hasimplemented anextensive liberalisation ofthetrade regime.
Overthelastsixyears, non-tariff barriers havebeenreplaced withtariffs; themaximum leveloftariffs
hasbeenreduced to70percentwithafewexceptions; thetariff structure hasbeenrationalized with
theaimofreducing disparities ineffective protection; andall'other charges 'havebeenmerged in
thestatutory tariffregime; allitems havebeenmade importable except forafewwhose entryisrestricted
onreligious, health andsecurity considerations, oronaccount ofbalance ofpayments difficulties.
Tocomplement theliberalisation ofthetrade regime, theexchange system hasbeenfully
liberalised. AsofJuly1,1994, Pakistan hasadopted current account convertibility oftherupee and
eliminatedallmultiplecurrencypractices.AccordinglyPakistanhasacceptedandfulfilledtheobligations
ofArticle VIIIoftheIMF'sArticles ofAgreement.
Oneoftheimportant objectives ofthemeasures described above hasbeentheelimination of
ananti-export biasinresource allocation andtoencourage efficient andcompetitive import substituting
activities. TheTrade Policy announced bytheGovernment for1994/95 specified thefollowing
objectives:
(i) PreparePakistan'sindustryforafreerglobaltradingsystememergingfromtheUruguay
Round Agreements.
(ii) Stimulate exports byfacilitating easyaccess torawmaterials, intermediates and
machinery.
(iii) Encourage efficient andcompetitive import substitution.
(iv) Impart greater transparency byminimizing administrative controls.
(v) Simplify andstreamline procedures tomake these userfriendly.
(vi) Ensure availability ofessential commodities inthedomestic economy.
(vii) Adopt tariff measures instead ofquantitative restrictions.
(viii) Facilitate thetransfer oftechnology intothecountry.
(ix) Strengthen research anddevelopment capabilities andencourage human resource
development.
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(x) Liberalise controls intheeconomy andplace greater reliance onmarket forces to
promote efficiency andgrowth.
(xi) Andtoprovide astable economic environment through greater continuity inpolicy
planning.
Problems inExternal Markets
Asstated elsewhere, Pakistan isoneofthefounder members oftheGeneral Agreement. Oddly
enough, however, thetwomostimportant areas ofitsexport interest havelargely beenkeptoutside
thescope ofthenormal rules ofthemultilateral trading system, andofthesuccessive rounds of
liberalisation under theGATT auspices. While agriculture fellvictim totradedistortions through large-
scalesubsidisation bythemajor industrialised countries, thetextiles sector hasencountered systematic
barriersagainstnormalgrowthoftradeanddiscriminatorytreatmentthroughtheMulti-fibreArrangement
anditspredecessor short andlong-term arrangements. Even theresults oftheUruguay Round have
fallen shortofthePakistan 'sgenuine expectations intheseareas. Inagriculture, massive subsidisation,
bothforproduction andexport, hasbeenlegitimised. Intextiles, likewise, therestrictions arelikely
topersist foralongperiod oftenyears.
Inaddition, exports arebeing increasingly subjected toinitiation ofanti-dumping and
countervailinginvestigationswhichcreatesuncertaintyanddepressesthebusinesssentiment.Investigation
periods aresometimes quitelengthy andthelegalcostsofdefending against these cases isprohibitive.
Thephenomenon ismatter ofparticular concern because although anumber ofinvestigations initiated
intoalleged dumping orsubsidisation ofimports fromPakistan allresulted innegative findings, they
hadalready created adamaging impact onnormal growth oftrade.
During thelastfewyears, thegrowing tendency towards creation oftrading blocs isextremely
worrisome toPakistan, especially asthese discriminate against non-member countries.
END