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

2021:2
Publication Year : 2021

Pakistan’s exports have stagnated since 2013 after growing significantly during the previous decade. While many other factors have undoubtedly contributed, the evidence outlined in this paper indicates that the substantial increase in overall protection, driven by incidence of non-tariff measures, has had a major and decisive impact. The paper investigates the incidence and intensity of nontariff measures (NTMs) in Pakistan from 1967–2015, based on trade theory. The study follows the methodology developed by Kee, et al. (2009) and adopted by Niu, et al. (2018) to calculate ad valorem equivalent (AVE) of NTMs and overall trade protection in combination with tariffs. Our results show that 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 at a time 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 the increase in overall trade protection in Pakistan is dominated by core NTM protection. The average AVEs of NTMs increased from 1 percent in 2003 to 55 percent in 2015. This increase is much higher as compared to regional comparator countries.