PRESS/TPRB/4
17February 1995
TRADE POLICY REVIEW BODY
Review ofPakistan, 15-16 February 1995
TPRB /GATT 1947 Council 'sEvaluation
TheTrade Policy Review Body oftheWorld Trade Organization (WTO) andtheGATT 1947
Council conducted itsfirstreview ofPakistan on15and16February 1995. Thetradereview ofPakistan
wascarried overfromthe1994programme ofreviews under GATT 1947. ThetextoftheChairman 's
concluding remarks isattached asasummary ofthesalient points which emerged during thetwo-day
discussion.
Thereview enables theCouncil toconduct acollective examination ofthefullrange oftrade
policies andpractices ofeachmember country atregular periodic intervals tomonitor significant trends
anddevelopments which mayhaveanimpact ontheglobal trading system.
Thereview isbased ontworeports which areprepared respectively bytheWTO Secretariat
andthegovernment under review andwhich cover allaspects ofthecountry 'stradepolicies, including:
itsdomestic lawsandregulations; theinstitutional framework; bilateral, regional andotherpreferential
agreements; thewider economic needs andtheexternal environment.
Arecord ofthediscussions andtheChairman 'ssumming-up, together withthese tworeports,
willbepublished induecourse asthecomplete trade policy review ofPakistan andwillbeavailable
from theWTO Secretariat, Centre William Rappard, 154ruedeLausanne, 1211 Geneva 21.
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 &1994), Israel (1994), 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).
95-0351
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CONCLUDING REMARKS BYTHE CHAIRMAN
Thisjointmeeting oftheTrade Policy Review Body oftheWTO andtheCouncil ofGATT
1947 hasnowcompleted thefirstreview ofPakistan 'strade policies andpractices. These remarks,
made onmyownresponsibility, summarize salient points raised during thediscussion; theyarenot
intended tosubstitute forthecollective evaluation andappreciation ofPakistan 'strade policies and
practices. Details ofthediscussion willbereflected intheminutes ofthemeeting.
Thediscussion developed under fourthemes.
Macroeconomic reforms andstructural adjustment
Participants commended Pakistan onitsmacroeconomic adjustment andstructural reform
programme which hadended fourdecades ofinward orientation. Pakistan wasencouraged tocontinue
withitsprogramme, thusensuring thebasis forstable, longrungrowth.
Some participants noted thatPakistan 'sbalance ofpayments wasstillunder pressure, duein
parttonatural disasters. They urged Pakistan todisinvoke itsuseoftheGATT balance-of-payments
provisions asthesituation improved.
Some members suggested thatinfrastructure weaknesses impeded economic growth. Theutility
ofimproving education wasstressed. Inthisconnection, attention wasdrawn tothelowparticipation
rateofwomen intheeconomy. Theprivate sector appeared toshow littleinterest inresearch,
contributing tothelowquality ofPakistani goods.
Anumber ofparticipants feltthatmeasures could betaken toimprove theflowofdirect
investmentintoPakistan,includingbroaderapplicationofnationaltreatment,simplificationofprocedures
andimproved intellectual property protection. Theneedtoaccelerate privatization wasstressed and
questions wereraised regarding localcontent legislation. Some concern wasexpressed about Pakistan 's
adherence tointernationally recognized labour standards, although others emphasized thatthiswas
notasubject fordiscussion inthisforum.
Inreply, therepresentative ofPakistan affirmed hisGovernment 'scommitment toeconomic
liberalization,deregulationandprivatization,despitevariousconstraints.Tothisend,fiscalandmonetary
discipline wasactively pursued under theStructural Adjustment Programme; however, theexternal
current account situation remained difficult, bothbecause ofthedebtservice burden andareduction
inworker remittances anddespite animproved tradebalance. Theoutward-orientated economic policy
would continue uninterrupted inthemedium- andlongterm.
Oneoftheprimary objectives ofeconomic planning wastoaccelerate development in
infrastructure, particularly inenergy, transportation andcommunications. Over46percentofpublic
expenditure intheEighth Planwasassigned totheseareas. Partnership between thepublic andprivate
sectors wasbeing encouraged.
Women hadhistorically lagged behind meninPakistan 'sdevelopment. Highpriority wasnow
given totherôleofwomen, withaspecial Ministry forWomen Development created in1979 and
specific programmes pursued under theSixth andSeventh Plans. Thethrust ofpolicy during theEighth
Planwasoneducation, health, andencouraging income generation forwomen; inaddition, removal
ofdiscrimination ineducation andemployment andbetter information andcommunication onwomen 's
rights andresponsibilities would beensured.
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Privatization would continue; 35additional units hadbeenidentified fordisinvestment and
modalities fordis-investing twonationalized banks were alsobeing examined. Thecritical linkage
betweeninvestmentpolicyandintellectualpropertyrightswasrecognised,andinter-agencyconsultations
werecontinuing withaviewtoovercoming Pakistan 'sreservations onprotection ofpatented products.
Pakistan wassignatory toalargenumber ofILOconventions, andhadsigned aMemorandum
ofUnderstanding withtheILOonthecritical areaofchildlabour. Therecommendations oftheTask
Force onlabour werebeing considered bytheGovernment andadoption ofthese should remove the
expressed concerns onthis"new issue". Pakistan wasconcerned, likeother developing countries,
thatlinkage oflabour standards withtrade could beusedasacover fornewforms ofprotectionism.
Trade policy andtrade régime
Participants welcomed Pakistan 'strade liberalization. Reductions inbarriers hadimproved
efficiency. Theintroduction ofathree-year tariff reduction programme wasseenasapositive step.
Some members asked whether thecontinuation oftradeliberalization wasconsistent withtheobjective
oftheEighth Plan(1993-1998) tolimittherealgrowth ofimports to5percentayear.
Participants welcomed theabolition ofImport Trade Prices forcustoms valuation andthe
introduction oftransactions value, asverified bypre-shipment inspection. Pakistan wasurged tomove
quickly toimplement theprovisions oftheCustoms Valuation Agreement.
Concerns were expressed over:
- thegeneral registration requirement forcompanies engaging inforeign trade andthe
restrictions onemployment offoreign managers;
- thehighleveloftariffs, withtariff peaks andsubstantial escalation;
- thelownumber oftariff bindings andthediscretionary power available tostate
authoritiesunderStatutes,RegulationsandOrders(SROs),whichreducedtransparency;
- theuseofexport prohibitions, particularly onagricultural products, andofminimum
prices, taxes andcharges;
- theextensionofexportsupportthroughsuchmeasuresastaxcreditsonexportearnings;
Pakistan wasurged tobring suchmeasures intoconformity withtheUruguay Round
Agreement onSubsidies andCountervailing Measures;
- lackofclarity intheuseofstandards onimported products;
- thejustification foranadditional 2percentsalestaximposed on28import items.
Participants alsowelcomed thereduction oftheNegative Import Listto70items andthe
elimination oftheRestricted List. Questions wereraised about theinclusion oftextile products on
theNegative List.
Questions were alsoasked about remaining trade privileges oftheTrading Corporation of
Pakistan andinformation wassought onadvantages given todomestic enterprises ingovernment
procurement; inthisconnection, Pakistan wasurged tojointheAgreement onGovernment
Procurement. Some members alsourged Pakistan tobring itslawsonanti-dumping andcountervailing
measures intoaccordance withtheUruguay Round agreements.
Therepresentative ofPakistan stated thattradepolicy wastraditionally fairly transparent, with
keyinstruments published intheOfficial Gazette. Businesses were familiar withtheSRO system;
noofficial discretion wasinvolved. Thenumber ofSROs, tariffexemptions andconcessions wasbeing
steadily reduced. Fuller rationalization ofthetariffstructure byJuly1996should remove anyproblem
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ofperceived lackoftransparency. Other trade policy instruments were notthought topresent any
problem oftransparency.
The5percentrealimport growth target wasindicative, withnoinstruments toenforce it,
andwould notslowtheliberalization process.
Thegeneral maximum tariff would bereduced to35percentbyfinancial year1996/97, with
minimum ratessetat10percentexcept forfood, fertilizer, pharmaceuticals andenergy sector imports;
tariff dispersion would belimited through a4-6tiered tariff structure within theabove maxima and
minima; andfurther integration ofthePakistan tariffintotheHarmonized System would beundertaken.
This, together withthewithdrawal ofexemptions andconcessions under SROs, would bring about
fulltransparency inthetariff régime. However, theSROsystem could notbeabolished altogether.
Pakistan aimed toincrease itsscope ofGATT bindings beyond 33percent. Asafirststep,
imports oftextiles wereallowed athighbound rates, togivetheindustry breathing space foradjustment.
Pakistan agreed toreview itstariff peaks andwould notescalate tariff ratesbeyond GATT bindings.
TheNational Tariff Commission (NTC) would identify items thatmight require temporary protection
asaresult oftariff reductions. TheNTC wasalsoentrusted withanti-dumping functions under the
Tariff Act1990. Regulations being drafted would reflect theUruguay Round standards andguidelines.
Itwasnotyetpracticable toextend theGeneral Sales Tax(GST) atretail levelacross theboard;
however, asafirststep,a2percentfixed salestaxhadbeenlevied ontheretail price of49items.
Fulldetails would beprovided. TheGSTnethadalsobeenexpanded from 486to863items.
Pakistan currently followed theBrussels Definition ofValue; thiswould bephased outunder
theUruguay Round Agreement. Asafirststep,Import Trade Prices hadbeenabolished; thepre-
shipment inspection agency wasresponsible forverifying thetransaction value ofgoods. Pakistan
would needthefiveyears'transition period toimplement theUruguay Round Agreement.
Therequirement thatimporters andexporters beregistered withagovernment agency and
bemembers ofaChamber ofCommerce andIndustry oranExporters 'andImporters 'Association
wasoriginally intended toprevent frauds andfacilitate handling oftrade complaints anddisputes.
Itwasrecognized thatthesystem wasoutdated. Consultations withthebusiness community, including
foreign firms, onthisissue would beinitiated inspring 1995.
TheNegative Listconsisted ofabout seventy 8-digit tariff lines, including 63textile products
onwhich restrictions weremaintained forbalance-of-payments reasons. Under theUruguay Round,
Pakistan wascommitted toremoving quantitative restrictions ontextile products form 1July1995;
inaddition, theachievement ofcurrent account convertibility leftlittlerationale formaintaining such
restrictions. Themaintenance ofremaining items ontheNegative Listwasjustified onaccount of
religious, moral, security considerations orunder international treaties.
Thethreestatetrading enterprises wereestablished in1972-73 partly toprotect farmers against
exploitation andmalpractices. These corporations nolonger enjoyed anytrade monopolies. Their
rôlenowwas,inpart,toundertake procurement where theprivate sector didnotyethavethenecessary
financial resources. TheCotton Corporation 'srôleinexports haddiminished because ofabsence of
surpluses; infacttheCorporation wasengaged in1994/95 inpurchasing cotton from Central Asian
states, because theprivate sector wasnotequipped tohandle thedifficult logistic problems involved
intransportation through Afghanistan.
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Likemanyotherdevelopingcountries,PakistanhadnotsignedtheTokyoRoundonGovernment
Procurement Code. Thebulkofgovernment procurement business inPakistan remained withforeign
firms under foreign financing ofmajor projects. Small-scale procurement remained withPakistani
firms, partly because oflackofsufficient interest byforeign firms; inaddition, mostlocalfirms acted
onbehalf offoreign businesses. Price preferences fordomestic suppliers were recognized by
international institutions asameasure conducive todeveloping theprivate sector; andtolerated because
ofcomplaints regarding dumping practices bysome State trading countries.
Pakistan 'sstandards requirements didnotapply toimported products. Relevant ministries
wereauthorized toestablish quality andsafety requirements forimported goods, withCustoms ensuring
compliance.
There werenoduties onexports. However, exported goods weresubject toprovincial levies
andtoanexport development surcharge of0.25percentofthef.o.b. value. Twenty-six products
were prohibited forexport; items subject toquota restrictions, minimum price restrictions, special
proceduresandqualitycontrolrestrictionsandcontractregistrationrequirementswerepublished.Export
earnings were exempt from taxonascale ranging from 25to90percent, butexports were subject
toanacross-the-board taxof1percentoff.o.b. value.
Sectoral questions
Participants welcomed themarket-oriented measures introduced inagriculture andindustry.
Questions wereasked about Pakistan 'sself-sufficiency indairy products, subsidies ondomestic and
imported wheat andrestrictions onimports ofmeat.
Participants recognized that,withabout 60percentofexports inthecotton group, Pakistan
wasvulnerable tochanges intheexternal environment. Questions arose about diversification ofexports.
Therepresentative ofPakistan emphasized thattheself-sufficiency goals oftheEighth Five
YearPlanwereessentially indicative. Moves towards market-oriented agricultural polices hadbeen
accelerated; self-sufficiency would beachieved through suchpolicies. Cotton andricewere not
subsidized; however, wheat, asabasicfood, received consumption subsidies, which werealsoextended
toimports. Government imported wheat through opentender, andwheat imports hadbeenopened
toprivate trade. Although tariffs ondairy products were high, theywould bereduced under tariff
reforms. Ceiling bindings onagricultural commodities, at100to150percent,compared favourably
withthose ofother countries.
Tosubject thetextile andclothing industry toincreased competition, theconcessional credit
facility anddualcotton pricing system hadbeenphased out; moreover, access tofibres, yarns and
cotton substitutes hadbeenimproved byallowing imports atreduced tariffs. Pakistan wascommitted
toremoving textiles fromtheNegative Listby1July1995; tariffs would bereduced to35percent
forgarments, 25percentforfabrics and15percentforfibres andyarns. Itwashoped that
diversification oftheexport sector would result, including intonon-traditional items.
External environment
Participants commended Pakistan foritsactive participation intheUruguay Round, especially
inthetextile andclothing area. Participants urged Pakistan toimplement fullyitsobligations under
theWTO assoonaspossible.
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Questions wereraised about Pakistan 'spolicy towards regional integration, including exchanges
ofconcessions under theSouth Asian Association forRegional Cooperation.
Participants recognized thatafavourable external economic environment wasneeded forthe
consistent implementation ofPakistan 'sreform programme. Inthisregard, thefullimplementation
oftheUruguay Round commitments, especially ontextiles andclothing, wasofcrucial importance.
Therepresentative ofPakistan replied thatPakistan hadratified theWTO infullrecognition
ofthehigher levelofobligations required. Ministries werecurrently working outmeasures necessary
toimplement individual agreements. Thesuccess oftheWTO would, however, hinge onthe
implementation oftheobligations bythemajor trading nations andtheunderstanding theymight display
towards theadjustment difficulties ofcountries representing small shares ofworld trade.
Despite reservations about thedrifttowards regional arrangements, Pakistan recognized that,
ifkeptwithin thelegalconfines oftheGATT, these could contribute toincreased trade.
Most quotas onPakistan 'stextile exports remained inplace. However, modification ofthe
existing agreements hadmitigated therigour ofthequotas; some hadbeenremoved andinother cases
enhanced flexibility hadbeenextended. There wasconsiderable concern about theerosion orwithdrawal
ofGSPfortextiles intheEuropean Union. Therigorous implementation ofstandards, combined with
rapid enforcement ofpre-shipment inspection andquality controls, hadreached thepoint ofbecoming
atechnical barrier totrade. NAFTA rules oforigin wereencouraging ashiftoftextiles production
from Pakistan totheNAFTA region.
Conclusion
Myconclusion from thisreview isthatPakistan hasbeenwarmly praised foritsadjustment
efforts andtheliberalization being undertaken. Pakistan wasencouraged tocontinue thisprocess
steadfastly. Theproposed tariff reform andtheelimination oftextiles from theNegative Listare
particularly welcome; members clearly hope thatthese willbereinforced byanincreased number
oftariff bindings. Atthesame time, asupportive external environment isimportant.
END