2. BALANCE OF PAYMENT AND TRADE REGIMES
Prepared By
Showzeb Jaffri
BBA 5th
IIHE

3. Contents Trade Regimes Pakistan’s Foreign Trade Trade Policy 1947-97
Trade Policy and Decade of Development
A New County
The Beginning of a Liberal Trade
Trade Liberalization under Structural Adjustment
Conclusion

4. TRADE REGIMES
Trade is the most Important factor that affect the industrialization
Trade can be influenced by the governmental policies like:
The import substituting industrialization of 1950s and 1960s
The non-devaluation decisions in 1948
The high tariffs and protection given to domestic industry in 1972
The devaluation decision of the Bhutto government in 1972
The decision by the Zia regime to delink the rupee from the dollar
In Pakistan the taxes on the imports constitute more than the half of the total governmental revenue
The importance of trade must be realized as it plays a vital role in the nature of development of a country.

5. The objectives of commercial policy
Maintaining equilibrium in the balance of payments and balance of trade
Attaining favourable terms of trade.
Promoting exports to derive the full benefits of comparative advantage and also to finance the country’s import requirements.
Import substitution to protect domestic production
Ensuring adequate availability of imported goods for both development and other purposes
Keeping the internal and external values of the national currency at desired levels

6. PAKISTAN’S FOREIGN TRADE
Pakistan exports in 1948 were dependent upon the five commodities
Raw jute
Raw cotton
Raw wool
Hides
Tea

7. All the raw jute and tea were came from East Pakistan.
On that period of time Pakistan were just producing those goods as well as exporting.
In 1952 primary commodities contributed towards economy 73%.
The main trading partners of that time for Pakistan were USA, UK, Germany, Belgium, Italy and Japan.

8. Pakistan Major Exports
1971/2
1980/1
1986/7
1994/5
% of total
Textile yarn, fabrics, made-up articles, and related products
29.45
14.24
41.52
52.76
Articles of clothing and clothing accessories -
9.27
15.03
20.51
Leather manufactures
Rice
8.13
19.13
8.11
5.58
Cotton
29.14
17.84
12.28
1.55
Vegetables and fruits
1.30
2.64
Fish
2.87
1.74
1.90
Others
29.81
37.20
14.89
11.60

9. Pakistan Major Imports
1971/2
1980/1
1986/7
1994/5
% of total
Machinery and transport equipment
30.00
21.65
29.80
28.74
Chemicals and related products
11.13
13.73
17.06
15.26
Petroleum and related products
8.42
28.68
15.12
Wheat
7.72 -
1.30
3.97
Animals and vegetable oil and fats
3.74
5.86
5.41
10.37
Cotton
2.95
Others
38.72
30.05

10. Contribution of East Pakistan
East Wing was very much supportive for the west wing of Pakistan.
West Pakistan was facing trade deficit, and was living on the exports of East Pakistan.
Jute was the main export of Pakistan and was came form Eastern wing.
East wing Provided 18% of West Pakistan total input in 1969.

11. Visible Trade Balance 1960/1 1961/2 1962/3 1963/4 1964/5 1965/6 1966/7
Pakistan
-1,387
-1,266
-1,572
-2,131
-2,966
-1,490
-2,186
East Pakistan
244
427
230
-224
-434
186
101
West Pakistan
-1,633
-1,693
-1,802
-1,907
-2,532
-1,676
-2,287
Exports
1,259
1,300
1,249
1,224
1,268
1,514
1,668
540
543
998
1,075
1,140
1,204
1,338
Imports
1,015
8,73
1,019
1,448
1,702
1,328
1,567
2,173
2,236
2,800
2,982
3,672
288
3,625

12. TRADE POLICY
At the early period Pakistan decided to maintain old exchange rate did not devalue.
Traded to USA and India at lower prices
The decision was undertaken because the primary goal was to sell raw jute to the Indian Industry.
In 1949 more than 50% of West Pakistan and 80% of East Pakistan trade was with India.
The Korean War broke out the demand for Pakistani exports
Mainly cotton and jute
The demand was increased by 109% and the prices became high.
It helps balance of payment to show a growing figure.
The Korean boom was lasted up to two years, on that point of time the 85% of the import were virtually without license.
After the collapse of the Korean was boom government reemployed the trade and foreign controls in 1952, which was the most important cause of the rapid rate of growth of manufacturing in Pakistan.
As the high tariffs consumer product raised their domestic prices, and industry become more profitable as an option than trade.
It becomes more profitable to shift into the production of these commodities domestically.
Government introduced the Export promotion scheme in 1956.
The import control system adopted in 1952.
Trade restrictions that are imposed determined both the extend and pattern of industrialization that was established in 1950s and that set the trend for latter development.

13. DECADE OF DEVELOPMENT
Ayub Khan in 1960s introduced Export Bonus Scheme
It helped the new comers to enter in the market
It shows positive impact on the economy throughout the period
overvalued exchange rate
increased exports
exports of cotton and jute were increased
Import of raw material and machinery also become easier.
The bonus voucher accounted for 72% of the effect of incentives on exports.
That government was also supported by the large amount of foreign aid more than 40% of the imports of the government were financed by the foreign aid components.

14. Rate of duty on imported goods by types of commodity 1955-60
1955/6
1956/7
1957/8
1958/9
1959/60
Consumption goods
Essentials 35
Semi-luxuries 54
Luxuries 99
Raw material for consumption goods 26
Unprocessed 43
Raw material for capital goods 23
Processed 38
Capital goods
Consumer durables 71
Machinery and Equip 14

15. A NEW COUNTRY 1971 was the year of the PPP government in Pakistan.
In these years Pakistan was struggling from the loss of East Pakistan.
The main exports of Pakistan were raw jute and jute textile from Eastern part.
Bhutto government decided to abolish the import licensing system, multiple exchange rate system as well as Export Bonus Scheme and import of all luxury items was banned.
The rule of PPP was the devaluation of Rupee which fell down at Rs. 11 as per USD 1.
The government encourages exports and imports by the devaluation and also collected additional revenue by imposing export taxes.
Those years can be say bad luck years following my recession in developed countries, bad crops due to floods and pests and other natural factors affected cotton and rice.
Pakistan overcomes these factors due to the arrival of a new market in Middle East.
In terms of labor and commodity exports, the new Middle East market was able partially to compensate for the loss of East Pakistan exports.

16. THE BEGINNING OF A LIBERAL TRADE
When Zia come in to the power he reduce the number of banned goods and lifting other restrictions, from 1977 to 1983 the number of items on the free list was increased from 438 to new 91 items.
Importing commodities was sleek and much easier.
Some other measures were also taken to boost exports.
These measures included export rebates, concessionary credit for exports and income tax and import facilities for exporters.
The most important policy was to delinking the Pakistani rupee from dollar and introduction of a flexible exchange rate.
In 1988 Pakistan’s nominal tariff rates for manufacturing industries were still among the highest in the word.
The World Bank felt that the trade regime that existed then still seems to be biased in favor of import substituting production.
Domestic markets are insulted from foreign competition through non-tariff barriers and high tariffs.

17. STRUCTURAL ADJUSTMENT
In 1988, in the budget government announced a trade policy in which they focused on improving the tariff structure
Reduce the number of banned items
Restricted list
Better set of export incentives
Import s licensing requirements
Exemption on the exports of luxury cars and alcoholic beverages.
The change affects to 400 items mostly the consumer goods.
They reduced the duty rates on imported raw materials.
IMF suggested the government to remove tariff on the items from 400 to 80 leaving only those on account of religion, security, reciprocity and international agreements.

18. Pakistan Exports in2002/3 Exports % of total Vegetable Products 8.6
Leather related products
6.2
Cotton
21.1
Textile and textile articles
48.8
Others
15.3

19. Pakistan Imports in2002/3 Imports % of total
Animals or vegetable oil and fats
5.5
Petroleum and related products
25.8
Chemical and related products
14.7
Plastic and rubber
4.9
Machinery and transport equipment
24.0
Others
25.1

20. Balance of Trade 2002/3 Total Exports US$ 11,160,300
Total Imports US$ 12,220,300
Balance US$ (1,060,000)

21. CONCLUSION
54% of the total federal revenue in 1992/3 originated form import taxes.
Govt. should encourage the private sector like export promotion scheme in 1956
Must focus on agriculture sector.
Develop computer or machinery industries in order to reduce imports
Government must have to reduce trade barriers and tariffs in order to maximize governmental revenue
Hence, any attempt to change the tariff regime would also have significant effects on revenue generations.

22. QUESTION & ANSWERS
THANK YOU!