Economic Advisory Group Backs Tariff Reform and Rebuts Auto Industry Campaign

Economists argue that a full page advertisement opposing the National Tariff Policy 2025–30 is itself the strongest evidence that protection guarantees profit rather than competitiveness

ISLAMABAD: The Economic Advisory Group (EAG) today issued a detailed rebuttal of a full page advertisement placed by the Pakistan Association of Automotive Parts & Accessories Manufacturers (PAAPAM) in a newspaper on 1 June 2026. The advertisement, headlined “Lower Tariffs = More Exports: A Simplistic Theory, A Damaging Policy,” attacks the National Tariff Policy (NTP) 2025–30. The EAG’s verdict is blunt: the advertisement does not refute the economics of trade, it confirms the diagnosis.

At the heart of the EAG’s response is a simple claim. The link between lower tariffs and higher exports is real, not a fairytale. Lower tariffs lift exports through a productivity channel: competition forces out the weakest firms and reallocates resources to the strongest, raising average industry productivity. The advertisement ridicules this chain without ever engaging it. More striking still, its own panels concede the case. The list it offers for shuttered factories, costly energy, expensive finance, weak infrastructure, policy uncertainty and low productivity, contains no tariff problems at all. Every constraint it names is a domestic supply-side or governance failure that protection hides rather than fixes.

The EAG argues that the auto sector is weak because of protection, not despite it. After decades of enjoying one of the region’s highest auto tariffs, the industry still cannot compete. A fighter handed every round by a rigged referee never trains, and guaranteed margins have left the sector malnourished, import-dependent and able to do little more than assemble parts from imported steel. The group adds that China’s record refutes rather than supports the advertisement’s case. China protected its auto sector only temporarily, then cut car tariffs from roughly 100 percent to 25 percent on WTO accession and dismantled local content rules, and only then became the world’s largest producer. Protection was scaffolding; liberalisation built the industry.

Above all, the EAG says, a sector that fails to compete and invest in increasing its scale should not hold the economy hostage. Pakistan’s auto industry asks every consumer and exporter to subsidise its guaranteed margins. The advertisement itself, the group contends, is the clearest evidence that protection delivers profit rather than competitiveness, and that the tariff wall should come down.

“The advertisement was meant to defend tariffs. It is, in truth, the single best piece of evidence we have that tariff protection guarantees profit while corroding capability. The leash should be removed.”

The EAG supports the direction of the NTP 2025–30, namely fewer slabs, capped duties, and the phasing out of additional and regulatory duties, arguing that a manufacturing policy must be innovation-driven and competition-tested, not profit margin-guaranteed. Pakistan’s consumers, its exporters, and ultimately all its manufacturers, the group says, deserve nothing less.

About the Economic Advisory Group

The EAG is an independent platform of economists, policy specialists and members drawn from academia, government and the private sector, formed in January 2021 under the auspices of the PRIME Institute.

Media contact:  www.eag.org.pk  ·  LinkedIn: https://www.linkedin.com/company/economic-advisory-group  · 

X: @eagpakistan