Name: Sauban Ahmed STRATEGIC TRADE POLICY FRAMEWORK 2015-18

ERP # : 13449
Assignment # 3 International Trade
INTRODUCTION:

Keeping in view the global trading environment and the trend of Pakistan's exports, the mid-
term strategic trade policy framework had been formulated after an extensive consultative
process among all the stakeholders known as Strategic Trade Policy Framework (STPF) 2015-
18. The main aim of the policy is to achieve an annual export target of $35 billion by June
2018, improve export competitiveness, transition from ‘factor-driven’ economy to ‘efficiency-
driven’ economy and Increase share in regional trade. The policy consists of four pillars:
product diversification and sophistication, market access, institution development and trade
facilitation. The trade policy envisages providing support to the different sectors in enhancing
the current or installing the new plant and machinery throughout Pakistan. Value addition is
one of the main aspect of this policy as Pakistan used to export large volumes raw & semi-
processed products which have considerably low value as compared finished product
therefore this document put a great deal of focus on Product Development. Exploring new
markets is another avenue where this policy provided a comprehensive roadmap through
Market research, trade missions, exhibitions & trade shows. Trade diplomacy in the
multilateral, regional and bilateral arenas is key to increasing market access. A short term
export enhancement strategy has also been devised that included the identification of focus
products as well as focus markets, initially it would target Iran, China, Afghanistan & EU (These
have been selected on the basis of potential for enhancement of Pakistan’s market share in
the short term) and focus on four products i.e. horticulture, meat and products, jewelry, &
basmati rice.
Review of the STPF:

The policy main focus is to turn the economy from ‘factor driven economy’ i.e. resource
abundance is key to achieve competitive advantage to ‘efficiency driven economy’ leading to
value addition. In order to achieve the above, blanket waivers and benefits are promised to
all major industries. However, treating every industry irrespective of its competitiveness is
not going to work as resources (capital or labor) should be allocated to those
sectors/industries having relative competitive advantage due to factor of production. STPF
try to take a very optimistic approach by taking a leap of faith of preferring efficiency and
innovation. This approach, looking at the current export performance of Pakistan is quite
unrealistic. Therefore, chosen sectors should be provided with the required resources to
achieve the desired results of exports.
STPF failed to devise a roadmap, consisting of integrated approach, to achieve the set goals.
As Pakistan includes Basmati rice as a key product to enhance exports, completely ignoring
the fact in the presence of Indian basmati rice it is very difficult for Pakistan to increase its
market share in the global market. Therefore, an integrated effort is required from different
stakeholders to achieve this seemingly impossible feat. Trade policy should be well integrated
with industrial, labour and development policy to achieve the export targets.
Another issue that this document failed to explain that how the productivity of the resources
would be increased to match the global competitors. Pakistan is fundamentally labor
intensive country however, the productivity level is quite low as compared to other
developing countries (India, Bangladesh, Srilanka etc.). A proper exercise to develop a long
term trade strategy would perforce address the competiveness of domestic industries. In a
country with a population of 200 million people, industries should enjoy an inherent
advantage of size and scale that could be deployed to limit imports and boost exports.
Name: Sauban Ahmed STRATEGIC TRADE POLICY FRAMEWORK 2015-18
ERP # : 13449
Assignment # 3 International Trade
However, poorly negotiated Trade Agreements combined with the misuse of Afghanistan
transit treaty, smuggling, under-invoicing, defective import valuations, counterfeiting and
widespread tax evasion have resulted in cheap imports which have severely undermined local
industries’ capacities and capabilities that survival in the domestic market is a challenge and
global competitiveness is a far stretch. The STPF fails to address the competiveness of
domestic industry or import reliance in a holistic manner that is badly compromising the
economy.
One of the important factor STPF brings into limelight is the role of multilateral, regional and
bilateral trade agreements in expanding the market share of Pakistan’s export. FTA (Free
Trade Agreements) & PTA (Precentral Trade Agreements) provide an excellent opportunity to
expand the trade base and try to get into the unconventional markets. However, FTA and PTA
should be negotiated very carefully to extract the maximum out of these. Otherwise if one
taken a careless approach or prefer one’s interest over national interest (with maligned
intent) resulting in poorly negotiated Trade agreements the could be quite detrimental.
STPF had talked about product diversification as a key instrument to boost export however,
the incentives included in STPF 2015-18 to encourage diversification are so small. Unless
Pakistan can proactively and continuously address export competiveness in the dynamic and
competitive global markets, it will constantly play a catch-up game with countries, who have
a more focused export vision.
Although STPF as document is quite comprehensive but still it failed to achieve what was
intended i.e. to increase the export value from $ 24 billion to $ 35 billion by 2018. However,
it should be taken as a starting point and try to capitalize on the success it achieved and
overcome the deficiencies identified/observed during the implementation process. Pakistan
today is on the cusp of a unique opportunity. The fall in global commodity prices and
improvement in the security environment allows the government to make critically needed
structural reforms. If undertaken, economic growth, including employment and exports will
surely accelerate and help rid Pakistan of the stigma of being a laggard in key indicators in
South Asia.