Nominal and Effective Rates of Protection by Industry in Pakistan: A Tariff Based Analysis

Ul Haque, Nadeem and Siddiqui, Rizwana (2007): Nominal and Effective Rates of Protection by Industry in Pakistan: A Tariff Based Analysis. Published in: Nust Journal of Social Sciences and Humanities , Vol. 3, No. 1 (2017): pp. 1-45.

Abstract

The study calculates nominal and effective rates of protection and their association with major characteristics of industries—labour intensity, export orientation and revealed comparative advantage. The results indicate that nominal as well as effective rate of protection has declined between two benchmark years—1990 and 2002, but vegetable oil, motor vehicles, and a sector producing intermediate good ‘other manufacturing’ remains highly protected. Overall results reveal that manufacturing import competing sectors enjoy higher protection through trade policy—tariff while negative effective rate of protection for majority of agriculture and services sectors show their disadvantage position in the economy. The results clearly indicate government priority for manufacturing sector over agriculture and services sectors. The results also reveal that effective rate of protection is negatively associated with industrial characteristics such as labour intensity, export orientation, and revealed comparative advantage indicating that a sector needs less protection if it has comparative advantage—labour intensive and produce exportable commodity. The results of the study also indicate that trade policy in Pakistan shifts trade in favours of trade in intermediate inputs in 2002 from trade in final goods in 1990. There is a need to restructure tariff structure to remove bias against agriculture and services sectors. Agriculture where majority of unskilled labour engaged ask immediate action from government to improve the condition of poor.

• Item Type: MPRA Paper
• Language: English
• Keywords: Protection, Trade Policy
• Subjects: F - International Economics > F1 - Trade > F13 - Trade Policy ; International Trade Organizations

References

Anderson, J. E. (1995) ‘Effective Protection Redux’ prepared for presen-tation to the European Economic Association meetings, Prague, Department of Economics, Boston College Chestnut Hill.

Antimiani, A. (2004) A NEW INDEX TO EVALUATE THE EFFECTIVE PROTECTION: An Application in CGE context paper presented in 7th Annual conference on Global Economic Analysis Trade, Poverty, and the Environment, Washington, D. C.

Balassa, B. and M. S. Daniel (1968) Effective Tariffs, Domestic Cost of Foreign Exchange, and the Equilibrium Exchange Rate. The Journal of Political Economy, 76:3.

Bhagwati, J. and T.N. Srinivasan (1973) The General Equilibrium Theory of Effective Protection and Resource Allocation. Journal of International Economics, 3, 259-282.

Bhagwati, N.J. and T.N. Srinavasan (1983) Lectures on International Trade. MIT Press.

Bruno, M. (1973) Protection and Tariff Change under General Equilibrium, Journal of International Economics, 3:3, 205-225.

Corden, W.M. (1966) The Structure of Tariff System and the Effective Protective Rate, Journal of Political Economy, 74.

Diakantoni, A. and E. Hubert (2012) Reassessing Effective Protection Rates in a Trade Perspective: Evolution of trade policy in “Factory Asia”’ WTO, Staff Working Paper ERSD-2012-13.

Din, M., E. Ghani, T. Mahmood, M.K. Niazi (2007) Effective Protection of Manufacturing Industries in Pakistan. Ministry of Commerce, Government of Pakistan.

Dorosh, P. and A. Valdes (1990) Effects of Exchange rate and Trade Policies on Agriculture in Pakistan. Research Report 84, International Food Policy Research Institute.

Dorosh. P., M.K. Niazi, H. Nazli (2006) A Social Accounting Matrix for Pakistan, 2001-02: Methodology and Results, PIDE Working Paper 2006-9, Pp 1-31.

Ethier, W. (1977) The Theory of Effective Protection in General Equilibrium: effective – rate analogues of nominal rate Canadian Journal of Economics, 10:2.

Johnson, H.G. (1965) The Theory of Tariff Structures with Special Reference to World Trade and Development.

Jones, R.W. (1971) Effective Protection and Substitution, Journal of International Economics, 1:1, 59-82.

KDA (1967) Effective Protective Rate of Korean Industries. Korean Development Association. Kemal, A.R. (1987), Effective Protection Rates—A Guid to Tariff Making”. The Pakistan Development Review, 26:4, 775-785.

Kemal, A.R., Z. Mahmood, and A.M. Ahmed (1994) Structure of Protection, Efficiency and Profitability, Pakistan Institute of Development Economics, Islamabad,1_134.

Khang, C. (1973) Factor Substitution in the theory of Effective 44 Protection: A General Equilibrium Analysis, Journal of International Economics, 3:3, 227-244.

Lewis, Jr., R. Stephen and G.E. Stephen (1968), Measuring Protection in a Developing country: The Case of Pakistan. Journal of Political Economy, 1170-1198.

Pakistan, Government of. (1992) CBR Year Book of Pakistan 1988-89-90-91 Federal Bureau of Statistics, Islamabad.

Pakistan, Government of. (2003) CBR Year Book of Pakistan 2002. Federal Bureau of Statistics, Islamabad.

Pakistan, Government of. (1996) Supply and Use Tables of Pakistan1989-90. Federal Bureau of Statistics, Islamabad.

Pakistan, Government of. (1991) “Census of Manufacturing Industries-90-91. Federal Bureau of Statistics, Statistics Division.

Pakistan, Government of. (2001) “Census of Manufacturing Industries-2000-1 on Web Table-1” Federal Bureau of Statistics, Statistics Division.

Pakistan, Government of. (1995) “Pakistan Statistical Year Book” Federal Bureau of Statistics, Statistics Division.

Pakistan, Government of. (2005) “Pakistan Statistical Year Book” Federal Bureau of Statistics, Statistics Division.

Ray, A. (1973) Non Traded Inputs and Effective Protection: A General Equilibrium Analysis. Journal of International Economics, 3, 259-282.

Siddiqui, R. (2008), Welfare and Poverty Implications of Global Rice and Agricultural Trade Liberalisation for Pakistan, chapter 5 in Mohammad A. Razzaque and Edwin Laurent (eds.) ‘Global Rice and Agriculture Trade Liberalization: Poverty and Welfare Implications For South Asian Countries’, London: Commonwealth Secretariat and Academic Foundation, Page 131-84.

Siddiqui, R. (2009) Modelling Gender Effects of Pakistan’s Trade Liberalization. Feminist Economics, 15:3, 287-321.

Siddiqui, R. and Z. Iqbal (1999) “Salient Features of Social Accounting Matrix of Pakistan for 1989-90, MIMAP Technical Paper Series no.1. Research Report no 171, Pakistan Institute of Development Economics, Islamabad, Pakistan.

Soan, T.X. (2001) The nominal and effective Rates of protection by industry in Vietnam: A tariff-based assessment. A report prepared for ‘Institute of economics – IDRC/CIDA’ project “Trade Liberalizations and Competitiveness of selected Manufacturing industries in Vietnam”.

Soligo, R. and J. Stern (1965) Tariff Protection, Import Substitution and Investment Efficiency. The Pakistan Development Review, 5: 2, 249-270.

Topalova, P. and A. Khandelwal (2011) Trade Liberalization and Firm Productivity: The Case of India. The Review of Economics and Statistics, 93(3): 995-1009.