The private sector has found the first trade policy of the Gilani government more business-friendly than the finance bill announced in June 08. It further liberalises trade.

Except for anti-globalisation activists, most theorists believe that outward oriented economic policy in this age of economic integration prepares developing countries to compete and achieve better growth rates.

“You cannot survive in isolation and why should you when you can strengthen local economic base by making it competent and expedite the growth pace by tactful economic diplomacy?”, an expert on international trade questioned.

“You can encourage or discourage certain practices but there is no way you can stop the cross border movement of merchandise towards markets. Had this been possible, wouldn’t the West stop inflow of Chinese products in to their markets?”

“A formal ban leads to promotion of informal channels. It is, therefore, advisable to concentrate in areas of comparative advantage and bargain from a position of strength with trading partners instead of seeking protection”, an experienced Pakistani trade negotiator currently working with the World Trade Organisation told Dawn over telephone.

Pakistan, however, according to some analysts and businessmen is more liberal than it needs to be.

“Pakistan is a resource rich country. There is no harm in importing commodities if the economy can afford it by matching the import bill with export earnings. Unfortunately, as the economy expanded for a variety of reasons, the country’s productive sector failed to keep pace with rising demand letting producers of other countries reap the benefit of expansion by entering the local market in a big way”, said a businessman requesting anonymity.

The trade balance has been worsening over the years. The trade deficit touched record of $20.7 billion during the fiscal year concluded in June 08. The total merchandise exports for the year 2007-08 were $19.22 billion with a net increase (between 2006-07 and 2007-08) of $2.246 billion.

The total imports during the 2007-08 amounted to $39.97 billion.

The officials of the trade ministry blamed this year’s trade deficit on international price surge beyond the government’s control.

“It is not of our doing. The underlying causes of high trade deficit are the increase in oil prices raising its import bill to over $11.3 billion as against $7.3 billion last year; import of wheat at higher than previous prices; increase in price of palm oil from $502.7 PMT to $839.3 PMT; raw cotton imports due to crop shortfall; increase in import of machinery and increase in import of fertilisers and chemicals”, a senior officer of the ministry of commerce said defending his department.

This year imports compared to last year have increased by $9.428 billion whereas exports have also increased by $2.246 billion.

“The emergence of China factor has changed the paradigm of trade in the world. So there is no point resisting liberalisation. We need to equip ourselves to compete to survive, and I see no other option”, said Iqbal Ibrahim, Chairman All Pakistan Textile Mills Association over telephone from Kaula Lumpur commenting on the policy.

“There is no quick fix solution available for the economy. It is going to be an arduous long drawn process. We understand the difficulties of the government and do not expect moon from them. Still we feel that the government needs to be more efficient bargainer and should not be unnecessarily generous with trade partners”, he added.

The officials of the ministry of commerce said that an attempt has been made to diversify and broaden the base of exports by incentivising the non-traditional sectors such as mining, drugs, gems and jewellery, chemicals, etc. The policy also favours manufacturing sector by facilitating import of machinery and raw material from the least expensive source to contain the cost of doing business.

“There are several measures that aim to lend support to the economy by easing the supply situation of the essentials to ensure availability possible at competitive market price and discourage hoarders and market manipulators”, the source in the ministry told Dawn.

Shamim A Shamsi, President Karachi Chamber of Commerce and Industry saw the trade policy as more of the same. He hoped that the new government would set clear economic targets and draw up a well co-ordinated economic strategy to regain the growth momentum based on dependable sectors of industry.

Some textile tycoons felt that the government has ignored the textile sector and went out of the way to accommodate the drugs and chemical sector.

Khalid Mehmud, a leading drug exporter found the trade policy better than the first federal budget of the coalition government of Gilani. He saw removal of the long list of finished medical products from the positive list of imports from India just a day before the announcement of the trade policy to be the real achievement of the local drug industry.

He saw the government still fixated at the subsidy addicted textile sector that enjoys the status of more equal amongst equals. “No other sector gets research subsidy or same terms of export refinancing or term financing as textiles. I do not see it as a fair deal to others”. According to a late last year review by the World Trade Organisation, Pakistan’s “trade policies have been liberalised in several important areas. In particular, customs procedures have been greatly improved, overall tariff protection considerably reduced, tariff bindings increased, and intellectual property rights strengthened.

In some other areas, however, trade liberalisation has slowed; for example, support for production and exports has increased. At the same time, structural weaknesses, including infrastructural bottlenecks, excessive regulatory controls and labour market rigidities as well as problems concerning governance, have inflated the costs of doing business”.