The decision to open up the minerals and automobiles sector for international competition will have long-term ramifications. While trade liberalisation is welcome, it remains to be seen under what module the country’s precarious production avenues and industries are being exposed.
Pakistan’s companies have ever lived under the umbrella of protectionism, and traditional heavy tariffs on imports have been in vogue at the cost of consumers. Thus, lifting of the lid under IMF pressure by slashing average import tariffs by one-third – from the 10.6% to 7.1% – over five years will instantly result in a revenue loss of Rs278 billion.
With no statistics on board as to what amount of profit and economic activity this decision will generate, this roulette has a great litmus test to pass.
The 33% reduction in tariffs, apparently on the face value, seems to be a great concession to the Fund in order to keep afloat the Extended Fund Facility. Moreover, this barter of a pound of flesh will smoothen the approval of over $1 billion loan tranche in these dire times of economic sluggishness.
In the long run, it is a bad deal and could come to cripple domestic production and a further lag in exports. It is altogether surprising that Pakistan has decided to drink this poisoned chalice when developing states are more and more being inward oriented, and even the US is closing its borders to foreign companies by slapping punitive tariffs.
Last but not least, the move is borne out of exigency and it seems local stakeholders have not been taken on board, making it a problematic riddle in times to come.
In the woods for long, our economy cannot afford unbridled competition altogether. This is where reforms towards sustainability are desired, and protecting the local industry is a must.
However, a research is desired to evaluate as to what extent this protectionism has resulted in rescuing a few companies at the altar of general masses, for whom access to competitive products remains an uphill task. Opening up for free trade must go through a cautious route.
#tariffs #free #trade
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