Enforcing the tariff wall via trade-distorting import measures: Curtailing imports across the stages of production

The previous data stories in this series, “Enforcing the tariff wall via trade-distorting import measures: Comparison across measures” and Enforcing the tariff wall via trade-distorting import measures: Cross-country comparison between Pakistan and Vietnam , highlighted the complex web of trade policies imposed by policymakers in Pakistan to curtail imports and how Vietnamese policymakers encouraged better linkages between exports and imports by not indulging in such policy intervention. This story delves deeper into the analysis and provides a picture of the import measures adopted by Pakistani policymakers to restrict and distort trade based on product classifications such as raw materials, intermediate goods, consumer goods and capital goods. The graphs suggest that not only were multiple measures imposed in the last decade but they affected all product classifications based on the stages of production, with industrial inputs and capital goods also facing such restrictions. 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 not only the intensity of the measures but the distribution across different product categories the highlights the use of import-restricting measures on industrial inputs as well as consumer goods[1],[2]. A significant number of agricultural raw materials, particularly fresh and chilled fish, were affected. Several measures on the imports of intermediate goods in the textile industry were imposed, which hurt the textile producers to obtain the desired quality inputs at the most effective possible price. The use of regulatory duties to curtail imports is again prominent on industrial inputs in the textile industry. Similarly, import constraining measures were imposed on the imports of capital goods in the machinery sector which impacted the importers of crucial parts and components to manufacture finished goods in Pakistan.

It is important to mention that import-restricting are often promulgated in Pakistan to achieve import substitution and localization of products. It is believed that the import-restricting measures are imposed to curtail the imports of consumer goods and increase domestic production. However, the data clearly shows that the imports of raw materials, intermediate goods and capital goods have also been significantly impacted, which is likely to have hurt domestic production capabilities of local producers instead. Economic literature on trade highlights the disastrous effect of the lack of competition from imported consumer goods on industrial productivity. The result of such measures imposed across wide-ranging product classifications is a lack of industrial development and the destruction of industrial competitiveness as import measures are imposed for short-term gains and benefits to specific interests but also create long-term structural challenges that come become difficult to overcome over time. EAG strongly recommends that the government moves full steam towards achieving the proposed tariff reforms and restrains from import regulations that curtail import competition.

[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.

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.