Enforcing the tariff wall via trade-distorting import measures: Cross-country comparison between Pakistan and Vietnam

The previous data story, “Enforcing the tariff wall via trade-distorting import measures: Comparison across measures”, highlighted the complex web of trade policies imposed by policymakers in Pakistan to curtail imports due to various reasons such as rising trade deficits and incentives to promote import-substitution related policies. While the Pakistani policymakers restricted imports, Vietnamese policymakers encouraged better linkages between exports and imports to ensure higher productivity levels and better integration in regional and global trade networks. According to the statistics provided by the World Bank’s World Development Indicators, Pakistan’s imports of goods and services were $50 billion in 2015, increasing to $63.7 in 2024. Comparatively, Vietnam’s imports of goods and services were $172 billion in 2015, increasing to more than $340 billion in 2024. The figures for exports are more disconcerting for Pakistan. Exports of goods and services from Pakistan increased from $29 billion in 2015 to $39 billion in 2024. Comparatively, exports of goods and services from Vietnam increased from $174 billion to $375 billion. Looking at the two trends, it is certain that the trend in the increase in exports is linked to the trend in the increase in imports. Curtailing and restricting import growth will harm potential export growth. The average tariff rate in Pakistan in 2017 was approximately 10 percent, while the average tariff rate in Vietnam was approximately 3 percent, dropping to 1 percent by 2022. EAG strongly advocates tariff reforms to promote the elusive export-led growth as promoted by the government. EAG has warned the dangers of poor structural transformation in Pakistan in its report on economic transformation.

The data on import measures extracted from Global Trade Alert reveals the stark contrast in the import measures adopted by the two countries[1]. Pakistan imposed more than 11,800 import-restricting measures in the decade between 2015 and 2024 while Vietnam imposed approximately 2,000 such measures[2]. Pakistan imposed a wide range of complex measures dominated by regulatory duties, internal taxation of imports and trade payment measures to discourage the flow of imports into the country. On the other hand, Vietnam did introduce other forms of non-regulatory import tariffs but such did not dent their import growth as shown in the figures above. Further, their import bans were imposed to discourage the imports of second-hand machinery and equipment rather than the imports of new machinery and equipment. Vietnam has encouraged the inflow of imported technologies and inputs to support its flourishing manufacturing sector.

In essence, Pakistan has adopted several import-restricting measures involving regulatory duties to curtail import flow. The number of measures adopted by Vietnam has been significantly low relative to those adopted by Pakistan. Vietnamese policymakers have ensured that their producers and consumers have access to imported inputs and products much needed for a competitive and productive economy. The reduction in the complex tariff regulations is much needed if Pakistan is to ensure better linkages between exports and imports and an eventual export-growth led economy. EAG strongly advocates for a more open economy exhibiting stronger regional and global trade linkages.

[1] Simon J. Evenett and Johannes Fritz (2020). The Global Trade Alert database handbook.   Manuscript, 26 October 2022.

[2] The interventions include all import-restricting measures that have been implemented in the last decade. Each intervention is tallied at the HS six-digit product level. All products listed in a particular policy document (SROs etc) are counted. Although, several measures have been removed subsequently as government policies continue to evolve, this exercise is not specific to measures currently in force.

[1] Simon J. Evenett and Johannes Fritz (2020). The Global Trade Alert database handbook.   Manuscript, 26 October 2022.

[1] The interventions include all import-restricting measures that have been implemented in the last decade. Each intervention is tallied at the HS six-digit product level. All products listed in a particular policy document (SROs etc) are counted. Although, several measures have been removed subsequently as government policies continue to evolve, this exercise is not specific to measures currently in force.