Pakistan Institute of Development Economics

PDR

THE PAKISTAN DEVELOPMENT REVIEW 

Non-tariff Measures, Overall Protection and Export Competitiveness: Evidence from Pakistan and Regional Countries (Article)

Pakistan’s exports have stagnated since 2013 after growing significantly during the previous decade. While many other factors have undoubtedly contributed to the stagnation in exports, the evidence outlined in this paper indicates that the substantial increase in overall protection, driven by the incidence of non-tariff measures, has had a significant and decisive impact.

The paper investigates the incidence and intensity of non-tariff measures (NTMs) in Pakistan from 1967- 2015, based on trade theory to calculate ad valorem equivalent (AVE) of NTMs and overall trade protection in combination with tariffs. The incidence and intensity of core NTMs and with-it overall protection increased substantially over time, especially after 2013, even though tariffs continued to decline over this period. Overall protection rose from about 18 percent in 2003 to 68 percent in 2015 when the average tariff rate had declined to 12.7 percent and with the tariff equivalent of NTMs, contributing the balance 55 percent. Our results confirm that core NTM protection dominates the increase in overall trade protection in Pakistan. The increase in average AVEs of NTM, from 1 percent in 2003 to 55 percent in 2015, is much higher than regional comparators. Also, the data provided by Niu, et al. (2018) suggests that the AVEs of NTMs in Pakistan’s major export markets (reflecting health, safety, labour, and product standards) increased significantly from 2003 to 2015.

To enhance the competitiveness of Pakistan’s exports, reducing tariffs will undoubtedly help. Still, this paper presents an urgent need to manage NTMs by reassessing their necessity and coverage, streamlining the regulatory process, harmonising it with trading partners, and improving the infrastructure to help Pakistan’s exporters comply with international standards

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