Competitive Import Substitution: Can Industry be Protected in Pakistan

Publication Year : 2020

Pakistan has been designing different trade policies over the years whose goal is to maintains its balance of trade deficit, ensure the availability of necessary goods and protect the sectors that are national priorities from foreign competition. Protection to domestic industry has been achieved by restricting imports, subsidizing exports, and more recently by imposing tariffs structured in a way to discourage imports of goods produced locally. Protection has clearly been a key objective of trade policy. Protectionism can come in the form of tariffs, quotas, export subsidies, import licensing, and exchange rate controls. Consider first the case of tariffs. A tariff is tax on the import of foreign goods in order to protect the domestic industry from foreign competition and with an additional benefit of generating revenue. Primarily, three different types of tariff are imposed; namely ad valorem tariff, specific tariff and composite tariff. Ad valorem is imposed in proportion to the estimated value of the product being imported, while a specific tariff is imposed as a fixed charge per unit of product imported. Finally, composite or compound tariff is a hybrid of ad valorem and specific rates.