Trade Liberalization In Pakistan

Both positive and negative effects are involved in the channels of transmission. Trade liberalization has had a poverty-reducing effect through enhanced growth, productivity and investment and through price stability. But it also has entailed some costs, in particular costs related to fiscal adjustment, which have been poverty-increasing. The axe of lower tax revenues resulting from lower import taxes and control of the fiscal deficit fell on developing expenditures. Not only are such expenditures directly pro-poor, but the employment opportunities that could have been created as a consequence of these expenditures were also foregone, adversely affecting the income of the poor. With respect to income inequality, the evidence suggests that

This liberalization process has affected various sectors of the economy, in which exports, imports and trade balance are the most important sectors. Similarly, pure effect of trade liberalization is to raise import growth more than export growth. Thus, trade liberalization has worsened trade balance in Pakistan. This result is consistent with the results of previous studies that in developing countries trade liberalization deteriorates trade balance in the short run. It means that the balance of payments consequences of trade liberalization matter in Pakistan. . The balance of payments crises have shown that output growth has been thwarted in Pakistan by its balance of payments positions. Further, trade openness policies in Pakistan have not been complemented with export promotion plans, which could provide valuable foreign exchange for higher imports originated mainly by liberalization policies. An important policy implication therefore is that Pakistan should liberalize its exports and imports in such a manner that a balance is achieved between exports and imports. More work is needed, however, to assess the impact of trade liberalization on trade balance by estimating disaggregated export and import

The average growth rate of trade deficit was 20.5%. During this era, the increase in oil prices and unfavorable weather condition was the major factors for increasing trade deficit. In 1970-71, share of primary goods was 33% which increased to 42% in 1979-80. The share of manufactured commodities was 44% in 1970-1971 which decreased to 43% by 1979-80. Imports of consumer goods had increased from 37% in 1970-71 to 58% in 1979-80.

In 1980s the average growth rate of exports was 8.5% and imports were 4.5%. The average growth rate of trade deficit was 0.9%. During this decade the share of primary commodities decreased from 44% in 1980-81 to 20% in 1989-90. The share of manufactured goods increased from 45% to 59% in the same time. The share of consumer goods in imports had declined from 65% in the beginning of the 1980s to 60% by the end of 1989. Pakistan’s share in total world exports increased marginally from 0.13% in 1980 to 0.15% in 1997

Pakistan’s share in the total world imports declined from 0.25% in 1980 to 0.22% in