Rationalising tariffs for the textiles and automobiles sectors

This report was requested by the Planning Commission of Pakistan in April 2011 to inform discussion on trade policy reform at several inter-ministerial meetings in time to serve as an input into Pakistan’s 2011/12 budget. The IGC report comments on the level and structure of import tariffs with special attention to trade policies affecting the auto and the textile and clothing sectors. It concludes with a set of recommendations for future trade policies. Starting in 1996/97 Pakistan embarked on a radical trade liberalisation programme which, along with a real exchange rate devaluation over the period of about 20 percent, enabled exports and the economy to benefit from the boom in world trade between 2003 and late 2007. The 2003/07 trade liberalisation reforms however, were incomplete and since 2007 there has been backtracking on these in a number of areas. This report provides an overview of recent trends in tariffs and of the institutional setting and issues which have led to the ad hoc nature of trade policies in Pakistan. A number of concrete policy recommendations are then suggested, including a general policy statement on the principles and objectives of trade policies; a list a set of suggested changes to specific polices; and suggestions to remove information gaps and improve transparency.