Partner: Ministry of Commerce, Government of Pakistan and USAID, Pakistan Regional Economic Integration Activity
Time Period: Jan-2019 to Dec-2019
Team Members: Dr. Vaqar Ahmed and Wasif Naqvi
Given the ongoing economic challenges related to the current account deficit, government is keen to look in to ways through which it can expand merchandise exports and reduce non-essential imports. An important way to achieve this goal is to look in to the structure and composition of Pakistan’s tariffs on imports. Tariffs and para-tariffs on imports influence prices of local production and exports. Over time these changes also influence consumption decisions and structure of the labor market. Past literature on Pakistan reveals a long-term anti-export bias in tariffs, which has increased input cots of sophisticated and high value added products produced and exported from Pakistan.
In 2018 Ministry of Commerce during consultations on National Tariff Policy had desired to put in place a long term (policy) direction so that exporters have certainty regarding the customs and related duties. The slab structure was expected to retain the cascading of nominal tariffs with progressive stages of manufacturing. It was envisaged the domestic industry should be given adjustment time and only gradual reductions in tariffs were proposed. Further it was proposed that the difference in the rates of tariff for the commercial importers and the industrial users of raw materials, intermediate and capital goods will be eliminated in three years’ time to provide access to such essential materials for small and medium enterprises. The institutional arrangement for amending tariff structure were also redefined. It was suggested that the tariff policy is the subject of the Commerce Division under Rules of Business. Therefore the powers to levy regulatory and customs duties will remain with Federal Cabinet, which in turn will act after seeking recommendation of the Minister for Commerce. This public private dialogue aims to take a stock of the current structure of tariffs faced by manufacturing industries and also look into the possibility of proposing recommendations for the Federal Budget 2019-20. It aims to categorise at the end of the day, sectors and businesses seeking protection, impact analysis of protection that has been granted to them so far and an objective assessment if maintaining high import tariffs for them are going to make them competitive even in long term.
- What changes in tariff policy are required to facilitate manufacturing sector’s transition towards the production and export of sophisticated and value added merchandise?
- If market access is essential for competitiveness of our export industry to get it even playing field in international markets shouldn’t it be ready to welcome competition of international suppliers at home as well? As unilateral concessions like GSP+ are EU specific only and are only a short to medium term relief, Pakistan has to look into possibility of more bilateral trade agreements i.e., giving and getting concessions across all sectors to compete globally in more lucrative markets?
- How long can domestic market-oriented approach of protectionist businesses can hold if current account deficits are not overcome by enhancing exports? Is import substitution even an option?
- What are the institutional gaps which are preventing tariff policy to be used as an instrument to promote diversification in Pakistani exports? How can the revenue collection priorities of the government be balanced with export competitiveness of the private sector?
- What are the perspectives of various institutions including Commerce Division, National Tariff Commission and Federal Board of Revenue regarding the current structure and composition of tariffs?
- What are the perspectives from zero-rated and non-zero-rated manufacturing industries regarding the current structure and composition of tariffs?
- Which research gaps prevent public sector to initiate, design and implement reform of long-term tariff strategy?
- Three consultative meetings for a dialogue between the key stakeholders from the government and the industry to discuss the current tariff policy, SEZs and FTAs and come up with recommendations for changes for a more amenable structure to promote export competitiveness and enhance trade and regional integration.