An Analysis of Pakistan’s Agricultural Commodities based on Effective Protection Rate and Its Decomposition

Etzaz Ahmad, Maha Ahmad, Ghulam Saghir

Abstract


This study analyses the impact of the government’s
interventionist policies in the product and input markets for the two
leading crops of Pakistan, wheat, and cotton. The study employs standard
measures of the nominal rate of protection (NRP) and effective rate of
protection (ERP). In addition, it also proposes a method to additively
decompose the ERP into two components representing the effect of
distortions in the product and input markets. The study finds that
government policies in the wheat market are mostly designed to protect
flour mill owners and thereby ordinary consumers at the cost of farmers.
Since the consumers of wheat by far outnumber the wheat growers, this
policy design seems to represent a political decision to appease the
common public. Regarding cotton, the study finds that the government
does not intervene much in the market to the extent that farmers are
left at the mercy of monopolistic procurement agencies and
better-informed rent-seeking intermediaries in the marketing chain.
Export procedure is so cumbersome that only the well-informed and
well-connected traders can benefit from price hikes in the world market.
The study recommends serious reconsideration of government policies in
the light of normative considerations. In this context, open debate on
agricultural policy in Parliament and the Senate would be highly
desirable.

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DOI: https://doi.org/10.30541/v60i3pp.235-250%20

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