Trade policy is a collection of rules and regulations which pertain to trade.
Every nation has some form of trade policy in place, with public officials
formulating the policy which they think would be most appropriate for
The purpose of trade policy is to help a nation's international trade run more
smoothly, by setting clear standards and goals which can be understood by
potential trading partners. In many regions, groups of nations work together
to create mutually beneficial trade policies.
Things like import and export taxes, tariffs, inspection regulations, and
quotas can all be part of a nation's trade policy.
Some nations attempt to protect their local industries with trade policies
which place a heavy burden on importers, allowing domestic producers of
goods and services to get ahead in the market with lower prices or more
Others abstain from trade barriers, promoting free trade, in which domestic
producers are given no special treatment, and international producers are
free to bring in their products.
Trade Policy of Pakistan
In order to address the challenges confronting Pakistan on the
economic fronts, Ministry of Commerce has launched a
comprehensive three years Strategic Trade Policy Framework (2009-
It would provide the reference to different trade measures by the
Ministry of Commerce and other ministries from time to time.
The overall objective of the STPF is to achieve sustainable high
economic growth through exports with the help of policy and support
interventions by the government, industry, civil society and donors.
Purpose of the Strategic Trade Policy
The Strategic Trade Policy Framework sets out the policy guidelines
and identifies the principle action areas
Need for developing and effectively implementing a national export
To provide the reference to different trade measures by the Ministry of
Commerce and other ministries from time to time.
To achieve sustainable high economic growth through exports with the
help of policy and support interventions by the government, Industry,
civil society and donors.
For active collaboration of the Pakistan Institute of Trade and
Development (PITAD) within a short span of time.
Other factors include:
For growth with Equity
For greater Opportunities for gainful employment
For sound macro-economic framework for trade environment
For concern with poverty eradication and environmental protection
For investing in Human resources
For targeting Poverty alleviation
For promoting private sector as engine of growth
For focus on small scale sector particularly in agriculture
Strategic trade policy framework 2009-12
The following measures may affect international commerce:
To strengthen export competitiveness, the government seeks to compensate
inland freight cost to exporters of "cement, light engineering, leather garments,
furniture, soda ash, hydrogen peroxide, sanitary wares including tiles, finished
marble/ granite/ onyx products."
To help designated sectors receive higher prices for their goods, the
government will support brand development activities for "surgical instruments,
sports goods & cutlery" with grants worth 25 percent of cost.
To support the textile industry, import duties on sizing chemicals may be
To promote the export of live sea food, the government has decided to grant 25
percent of freight cost to such products exported by air.
To support exports of processed foods, the government wants to compensate
exporters partially for necessary research and development investments. This
reimbursement could amount to 6 percent of export value.
To allow its exporters to enter Muslim markets, the government plans to set up
a Halal Certification Board. The cost of certification shall be subsidized with up
to 50 percent of expenditure.
To increase international market access for electrical appliances, the
government decided to bear half the cost of certification through Underwriters
In an attempt to increase overall competitiveness, the government promised to
"zero rate" exports completely. As the elaboration of such a measure will take
time, the government has decided to provide "interim relief to the sectors of
tents & canvas, electric machinery, carpets, rugs and mats, sports goods,
footwear, surgical/ medical/ veterinary/ beauty care instruments, cutlery, onyx
products, electric fans, furniture, auto parts, handicrafts, jewelry and
To reduce the cost of doing business in Pakistan, the government will ease
import restrictions on designated specialized machinery, transport equipment as
well as spare parts in the construction, waste disposal, oil and petroleum
To allow improved development of pharmaceutical and engineering services,
the government plans to ease export restrictions on the industries.
To provide lower income citizens with computers, the government has decided
to allow the import of used computers. However, to allow for the development of
national television industry, used cathode ray tube monitors may only be
imported along with used computers.
To encourage local vaccine production, the government plans to restrict imports
to World Health Organization-approved plants only.
Objectives to be obtained
Enhance the competitiveness of Pakistan’s exports
Reducing Cost of Doing Business
Protection and promotion of SMEs
Focus on products with higher sophistication potential
Promote agricultural development through exports
Enable Pakistani exporting companies overcome the negative effects of
global demand contraction.
Market Access Initiatives
(Economic Cooperation Organization Trade Agreement)
• ECO member countries are:
• Pakistan, Iran, Afghanistan, Turkey, Azerbaijan, Kazakhstan,
Tajikistan, Turkmenistan, Kyrgyzstan and Uzbekistan.
• Agreement was signed - July 2003.
• Initial Agreement = reduction of maximum tariff slab to 15% within 8
• On a fast track initiative, reduction of tariff to 10% on all traded items in
• 3rd Ministerial meeting of ECO states was held in July, 2005.
SAFTA (South Asian Free Trade Area)
• SAFTA was signed on 6 January 2004 at Islamabad.
• The Agreement shall come into force on 1st January 2006.
• Tariff Reduction to 0-5%: vulnerable sectors protected through Sensitive
• Non-Least Developed Countries (Non-LDCs)
• India – Pakistan - 7 years (2013)
• Sri Lanka – 8 years (2014)
Preferential Trading Arrangement (PTA) with D-8 (Bangladesh, Egypt,
Indonesia, Iran, Malaysia, Nigeria, Pakistan,
• Two meetings held
• Next meeting due
Trade Preferential System (TPS) with OIC
• Negotiations initiated
• Slow progress due to divergent views in a large membership of
Gulf Cooperation Council (GCC)
• Agreement signed in August 2004 envisaging establishment of Free
Trade Area with Pakistan
• Pakistan has requested G.C.C. for initiation of negotiation. First
round is expected in September, 2005
Market Access Initiatives
The FTA with Sri Lanka was signed in June 2002.
Operational since 12 June, 2005.
Tariff on items (other than NCL) will be eliminated:
PTA signed with China in November 2003 is operational since 1st
In December 2004 during the official visit of the Prime Minister to
China it was announced to initiate extension of PTA, Joint Feasibility
Study on FTA and to negotiate an Early Harvest Program.
Following achievements made during visit of the Chinese Premier On
5th April 2005:-
Completion of Joint Study and commencement of FTA
Early Harvest Program was finalized.
Bed-linen, table linen & other home textiles, towels, cotton &
blended fabrics, mangoes, oranges, dates, tarpaulin and marble
articles like tiles, surgical goods, sports goods & cutlery etc.
Some organic chemicals & machinery for textile, leather production,
Bilateral trade between India and Pakistan is extraordinarily low—less than
1 percent of their global trade. Their volatile political relationship has
overwhelmed attempts to encourage trade between the two countries, and
has also impacted economic integration in the South Asian region as a
whole. There are both political and economic obstacles to expanding trade
between the two countries. Greater economic co-operation could, however,
provide mutual economic benefits, such as lower prices for consumers,
much-needed revenue for the governments, and cost-effective gas import
to India via Pakistan. Perhaps most importantly, it could generate new
linkages between the two business communities, thereby nurturing
constituencies for peace in the region.
Benefits to Pakistan:
— low cost capital and consumable inputs which would help to cover the
short fall in agricultural produce;
— labor wages in Indian manufacturing sector are two-thirds those in
Pakistan with better productivity;
— superior technology;
— Indian engineering goods are 30-35 per cent cheaper than
corresponding Pakistani products. While an Indian scooter sells at Rs
20,000 which is one-third the price of a Pakistani scooter which is priced at
Rs 65,000; a car costs Rs 4.5 lakh compared to Rs 6 lakh.
— India licence produces Swiss and German textile machinery which
Pakistan imports at higher costs from other sources.
• Issue of MTN status.
Pakistan signed a Trade and Investment Framework Agreement
(TIFA) with USA in June 2003.
The First round of TIFA Talks was held on 28-30th September, 2004
Bilateral Investment Treaty negotiations initiated:
Draft BIT discussed at London
(7th -11th Feb, 2005)
Second Round due in Islamabad
U.S was requested to start FTA negotiations.
Review of Export Competitiveness
It is not only in agriculture that we have excelled in; Pakistan has a reasonably strong industry base. In
many areas, our industry not only fully meets the local requirements but also earns valuable foreign
exchange for our country.
Textile Products. Our textile products are famous world wide which account for more than 50% of our
total exports. There are over 500 Textile Mills producing high quality textile products. Majority of our
textile industry is based in Faisalabad while units do exist in other parts of the country also.
Fertilizers Industry. Pakistan is one of major exporters of fertilizers with one of the world’s biggest
fertilizer plant in recently constructed our country. Being an agricultural country the consumption of
fertilizers is a direct indicator of the growth of the agricultural sector. Overall industry capacity is approx
7.5million tons per annum.
Cement Production. Total of 30 cement industrial units are meeting the local and
regional requirements and contributes approx 30 billion Rs in the form of taxes. Our
cement industry has a production capacity of 20 million tons out of which we exported
approx 11 million tons of cement which earned 700 million US$ of foreign exchange. More
than 150,000 people are employed in cement sector.
Sports Goods. Located in Sialkot our sports goods industry has earned very good name
for the country as well as foreign exchange. Our exports in year 2009 were than 35 million
US$. Made in Pakistan footballs, soccer balls, gloves are famous all over the world.
Leather Products. Leather good are the second major export items of Pakistan after
textiles. Pakistan exports are approximately 700million US$ annually. Italy is a major
importer of our leather jackets, gloves and handbags.
Surgical Instruments. Based in Sialkot, our surgical industry has a history of more than
100 years. In 2009 Pakistan exported nearly 250Million US$ worth of surgical instruments
to the world.
Marbles and Tiles. Our natural onyx marbles and art crafts as well as synthetic
tiles are other exportable items. We have large natural reserves of high quality
marbles and granite. Our local labor force is trained and expert to produce tiles
and other related products using the well established infra structure.
Electrical Appliances. Our industries in Gujrat, Gujranwala and
Shiekhupura are producing good quality electrical appliances like fans,
room coolers, air conditioners, washing machines etc. These are export
quality products which have established good reputation over a period
of time. These appliances are exported to regional and other friendly
Pakistan’s Evolution and structure of Trade
Pakistan Trade Balance Stats
POSITIVE ASPECTS OF TRADE POLICY
Monitoring and evaluation method:
The Pakistan institute of trade and development Islamabad, an independent policy
think tank of the ministry of Commerce, would undertake a systematic evaluation of
the impact of Trade Policy 2009-12 on the trade performance of Pakistan
Insurance cover for visiting buyers:
Complete Insurance cover for buyers coming over to Pakistan for buying.
Research and Development:
A fund is planned to be dedicated to support these activities named Technology,
Skill and Management Up-gradation Fund of Rs. 3 billion is being established.
It has been decided that surgical instruments, sports goods and cutlery sector
would be granted 25% support on brand development activities.
Trade policy 2009-10 would face many challenges.
The problems being faced by the economy involves infrastructure
deficit, severe energy shortage, poor innovation and technological
infrastructure, low labor productivity, low levels of manufacturing value
Furthermore, there is little foreign direct investment in manufacturing
and exportable sectors, lack of surplus, absence of economies of scale
in the production processes.
All these challenges may make the desired targets difficult to achieve.
Economic downturn in our major markets:
Consumer confidence erosion in USA and its ripple effects in EU;
Buyers’ perception of Pakistan as a supplier of low quality products and
inability to deliver in bulk and in time.
Negative travel advisories.
Long term structural issues
Rapid change in monetary policy
Competition in export market.
High cost of finance
Energy Crisis (Electricity and Gas)
Law and Order
Lack of International Competitiveness
Investment declined to 19.7% of GDP as against 22.0% of last year
Large Scale Manufacturing growth declined by 7.7% (Jul-Mar) as
against increase of 4.8% in 2007-08.
Reaction of Business Community
Many businessmen rejected the trade policy 2009-10,terming it directionless
and flawed. Some termed it wishful list.
Other labelled it insufficient. Many chambers of commerce interpreted it
differently. But majority showed their deep concerns about its different
measures, concessions and mechanism.
Federation of Pakistan Chambers of Commerce and Industry president said that
the trade policy seems a medium-term policy framework for the next three
Some said that the problems of foreign exchange reserves, higher trade deficit
and consequently low investment, unemployment and low GDP growth will
It is the second time that import targets were not mentioned in the trade policy.
The government has fixed export growth target of 6 percent for2009-10 and
2010-11 and 13 percent for each of the successive years.
Pakistan Tanners Association (PTA) appreciated the government's initiative for
launching comprehensive leather and leather products export plan in
consultation with the major players of the leather sector.
IMPORTANCE OF EU MARKETS FOR
The European Union remains Pakistan’s largest trading partner.
Receiving 27.4% of Pakistan’s exports and providing 17% of its total imports.
The overall volume of trade between the EU and Pakistan was worth euro 5.06
billion (equivalent to Rs 303 billion) in the year 2002 with a trade surplus of euro
765 million (equivalent to Rs 46 billion) in Pakistan’s favor.
Pakistan’s trade with the EU is mainly composed of textiles, which account for
over 60% of the total Pakistani exports to the EU, followed by leather products,
which account for 13% of the total Pakistani exports.
The imports from the EU to Pakistan mainly comprise finished products like
mechanical and electrical machinery, which accounts for over 35%, followed by
chemical and pharmaceuticals for 10% of the total EU imports to Pakistan.
Trade with Europe is clearly in Pakistan’s favor.
EU INVESTMENTS IN PAKISTAN
EU is the second largest investor in Pakistan and desires to further promote
trade and economic ties and cooperation with Pakistan.
Pakistan has one of the most attractive foreign investment regimes in South
Asia. Foreign companies can invest in all three key sectors of the economy
namely Agriculture, Industry and Services. The industry sector where foreign
equity investment up to 100% is permitted in most cases is the most open.
Major investors in the country come from the UK, the Middle East and the US,
each contributing 25% of FDI. China has traditionally had a strong presence in
the country, mostly through infrastructure development and supply of low cost
goods and equipment.
As far as the inflows of foreign direct investment into Pakistan are concerned,
the USA, the UK, and the UAE are the three major sources of foreign direct
investment (FDI) in the country.
The UK and Pakistan have an Investment and Promotion Agreement that has
recently been extended to cover the Isle of Man, Jersey and Guernsey
“No books it sounds all nice and great, but problem lies in the
implementation stage where our government fails.”
After going through the whole trade policy of Pakistan, we conclude that
it covers almost each and every aspect of trade. Policy making is
directly linked with implementation of those policies, and this is the
place where our government fails to graduate from.
Some of the trade targets were too optimistic, the ministry failed to
understand the condition of the local industry. Increased decline in
manufacturing because of lack of energy like electricity and gas has
affected the industry on the whole. Therefore increasing the trade
targets means that they won’t be able to achieve those trade targets.
Also because of poor law and order situation, the local industries mainly
textile industry has suffered a lot, and now shifting to Bangladesh and
other countries. Therefore, law and order situation should be improved
in order to save the remaining industries.