International Trade Policy - Case Study Example

International Economics International Trade Policy: A Case of Pakistan - the Asian Giant No country can exist in isolation, global interaction is essential for survival and existence. Thus, accordingly, countries interact with each other for several purposes to ensure that they remain on the global map and have good terms and relations with each country, especially the major ones[1]. Amongst the several reasons for interaction, some are the development of Trade and Commerce, ensuring friendly ties to assure assistance in times of need, and countries having common goals are helpful to each other in assisting the same Of these few reasons, the one that is essentially important is Development of Trade and Commerce. Development of trade and commerce is essentially linked to the survival, growth, and progress of a nation, particularly by concise means of imports and exports. The policies or regulations that essentially govern and deal with defining the international trade between countries are known as the Foreign Trade Policy or International Trade Policy. These policies include, but are not restricted to, the tax brackets, import duties on various equipments (goods and services), items for trading, non-allowable items, quotas and tariffs, and so on. Inclusive of this data, there are also the incentives for foreign investment that encourages foreign investors to invest in the country along with incentives for local producers to export, and so on [2]. Thus, the policy defines the terms and regulations for trading i.e. imports and exports. The Asian region has been prospering of late with a good speed, and amongst the many nations, Pakistan has been one of the prime examples of prospering nations particularly under the current military regime. The name of this nation has been in the headlines since a while now, thus, it would be very informative to analyze their trade policy structure. Particularly considering the fact that the foreign direct investment has been growing in the region of late, it would be very interesting to see the structure that is enhancing this figure in recent times[3]. Since October 1999 to date, Pakistan has moved towards being a much more stabilized nation than it has ever been since its existence in 1947. Under the military regime of General Pervaiz Musharraf, the nation has moved towards economic stability and growth to the current day, with economic development prospering in particular. This stability in the economic and political environment has led to tremendous growth in the net trade figure, inviting foreign investors and trades to contribute and interact with the local ones and have a good prospectus for the future outlook[5]. This report highlights the trade policy for the year 2006-07 so that judgements can be made on fair grounds that whether this policy has been a success or otherwise. The following paragraphs highlight the main aims and objectives of the international trade policy relating to the export of goods and services [7, 9]. Pakistan's exports have been on the lower side in the past many years but there are improvements. A lot of expectations are from the textile sector. In the similar regard, there have been a lot of machinery imports in the previous fiscal years and the supply is, therefore, expected to boost in terms of units produced. To enhance the quality and marketing of textile products (another core industry of Pakistani exports), Pakistan School of Fashion Design was given a huge grant to ensure its growth in terms of providing better quality to the students, and thus, giving the nation a further enhanced human resource. The grant also included Rs.475 million for construction of another campus. Another point of focus for the government of late has been the cotton production and exports. In this regard as well, the government plans to setup plants and laboratories to enhance the quality of cotton produced in the nation. Skill development has been another focus because there is some tremendously capable human resource available in the nation but there is tremendous need for their appropriate training and development. For further boosting the exports, there has been extensive participation from Pakistani producers in exhibitions world over to introduce Pakistan as a brand and to market their existence and their products appropriately. Alongside, the Export Promotion Bureau is also working in the similar context and promoting the Pakistani products. Apart from these export pertaining objectives, the report would now discuss the import objectives set by the government as a part of their trade policy [7, 9]. The imports have been on the rise in the nation and there have been steps take to reduce this figure, however, restrained by the implementation of trade agreements like NAFTA, SAFTA, FATA, etc. There have been two major constituents of the increasing import bills and i.e. increasing oil prices and the drastic increase in machinery import. The later figure is avoidable in future because the useful life of the machines would ensure that there is no regular imports, however, would boost the output and thus, enhancing the exports. A major strategy to enhance imports is by means of Foreign Direct Investment i.e. inviting foreign investment by having investor friendly terms. This has a dual impact on the trade account as FDI would be accounted for as an import type transaction in the balance of payments account, whereas the goods and services produced through this investment would provide more variety of goods and services to the locals, and if exported across the nation, it would enhance the export figure of the nation itself. The objectives set as a benchmark to enhance the foreign trade in the nation are fairly remarkable in terms of the better thought process that has been involved in formulating the policy and strategy. However, there are issues that would restrain the policies from being successful. The major issue is the Sole-Proprietor Issue. More commonly known as the Seth culture in the country, many of the sole proprietorship business (that constitute majority of the business setup in the nation) have the traditional mentality and are pretty contented. Many of the textile and cotton industries are owned by such sole-proprietors, and this on a general note becomes a hurdle for the government to establish any such policy that would temporarily increase the cost of production or would require further investment as the respective policies of the owners are far against it. This also implies that these owners are reluctant to invest more and produce more as they are contented with what they have. Even they do not want to invest in any human resource activity which includes hiring trained professionals from the best institutes of the nation [1]. Alongside that, there is also huge poverty issue in the nation. Poverty is another major hurdle in the government plans not being successful. There is a lot of capable human resource in the nation that wants to work but the flow comes in the training and development needed. For this purpose several institutes are established by the government but the fees structure for the same is not feasible for much of this idle sitting resource. As a result, there is lack of skill-full and trained personal leading to lesser facilitations for investment, and in turn reduced import type activities particularly in terms of FDI [2]. However, apart from these hurdles in the way, there are some good points as well that support government policies and ensure that the aims and objectives are achieved. These mainly include development of free zones, shipping ports, infrastructural development, and privatization packages; all these and many more options invite foreign investors to invest in the nation allowing it to grow. There has been development of free zones such as Karachi Export Processing Zone (KEPZ) and Lahore Export Processing Zone (LEPZ), and shipping port i.e. Gawadar, development of northern by-pass can be considered the infrastructural development required to attract foreign investment to the country. Privatization deals have a dual purpose; firstly, it attracts foreign investment and secondly, it brings in more competent and experienced management for firms in the nation that would enhance the performance of the public sector organizations such as electric supply corporation, water and sewerage boards, etc. [6] Conclusively, the approach of Government of Pakistan has been to reduce exports and have investors and producers come into the nation and produce goods and services locally for reasons such as boost to the local industry and increasing exports. In addition, such activities would also ensure the fact that there is employment in the nation and money is in proper circulation in the economy. The policies have, so far, been quite successful and can be rated as 3 on a maximum scale of 5, which ensures some work done but a lot more needs to be done in this regard. The nation Pakistan has some awesome potential to be unleashed and defining appropriate trade policies can make the most out of this potential. It is basically the grass-root issues that need to be taken care of and the chain effect would be visible to the stakeholders [5]. Bibliography 1. Parvez Hasan. 1998. Pakistan's Economy at the Crossroads. Oxford University Press. 2. Ishrat Husain. 2000. Pakistan: the Economy of an Elitist State. Oxford University Press 3. Shahrukh Rafi Khan. 1998. Fifty Years of Pakistan's Economy. Oxford University Press 4. Hafiz A. Pasha, Nuzhat Ahmad, Yasmin Jamal. 1998. Case Studies in Applied Microeconomics. Oxford University Press 5. Syed Nawab Haider Naqvi, Khwaja Sarmad. 1997. External Shocks and Domestic Adjustments. Oxford University Press 6. Ayesha Siddiqa. 2007. Military Inc.: Inside Pakistan's Military Economy. 2007. Pluto Press. 7. Trade Policy Speech 2006-07 (2006) [Internet] Available from: [Accessed 12 July 2007]. 8. Government of Pakistan Trade Policy (1996) 2 [Internet] Available from: [Accessed 12 July 2007]. 9. Trade Policy: an attempt to make the nation wealthier (2007) [Internet] Available from: [Accessed 12 July 2007]. 10. Trade Policy Review of Pakistan (2002) [Internet] Available from: [Accessed 12 July 2007]. Read More