Trade and Strategic Trade Policy of Pakistan
Trade is an important part for development no matter the development of the economy. In a globalized world where the use of global value chains (GVCs) is increasing day by day, it is essential that developing economies look to become a larger part of this system. Many countries continue to open their borders up to trade through creation of a safer environment for investors. Foreign investors require better infrastructure, strong institutions, and better policies. However, Pakistan has had a difficult time with opening up to trade and increasing their trade numbers. Pakistan exports have been between $20 and $25 billion since 2010, only going above $25 billion ($25.11 billion) in 2013-2014 fiscal year (Pakistan Bureau of Statistics). Whereas, imports to Pakistan have been increasing and according to the latest data from Pakistan Bureau of Statistics, the trade deficit stands over $20 billion. Furthermore, exports have fallen significantly shorter of the cumulative exports goal for 2012-2015 of $95 billion stated in the Strategic Trade Policy of Pakistan (2012-2015).
Falling short of the target $95 billion by around $20 billion is not a small amount especially in the case of Pakistan where exports have been on a decline. In addition, further ambitious goals have been set for the next few years in the Trade policy from 2015-2018. This trade policy aims for an increase in trade by an estimated $10 billion over the 3 year period to $35 billion in 2018. Reaching this goal will be close to impossible as Pakistan has failed to create a concrete plan to boost exports from the country. All of Pakistan’s neighbors have done a better job at opening their markets to trade. When we look at the trade openness (calculated as trade as a share of GDP) in 2015, Pakistan remains behind all of its neighbors. Pakistan has a trade openness of 27.6% whereas India stands at 42.4%, Afghanistan at 56.97%, and China at 40.6% (The World Bank).
The Way Forward
Instead of creating ambitious plans that the government fails to achieve, policy makers need to come together to make a long term strategy in order to improve the trade numbers of Pakistan. In creating a long term policy, policy makers should look to decrease tariffs and open up the borders to trade. They should also target more countries to create Free Trade Agreements or become part of larger Regional Trade Agreements. Trade agreements can facilitate firms which are looking to trade and create larger markets for firms in Pakistan. In a world that is increasingly moving towards global value chains and interdependency, Pakistan needs to open up its markets and become a part of these global value chains. Lagging behind in trade will only have a negative impact on Pakistan’s economy which is already suffering.