Non-tariff Measures, Overall Protection and Export Competitiveness: Evidence from Pakistan and Regional Countries

Irfan Aleem, Bushra Faizi

Abstract


Pakistan’s exports have stagnated since 2013 after growing
significantly during the previous decade. While many other factors have
undoubtedly contributed to the stagnation in exports, the evidence
outlined in this paper indicates that the substantial increase in
overall protection, driven by the incidence of non-tariff measures, has
had a significant and decisive impact. The paper investigates the
incidence and intensity of non-tariff measures (NTMs) in Pakistan from
1967- 2015, based on trade theory to calculate ad valorem equivalent
(AVE) of NTMs and overall trade protection in combination with tariffs.
The incidence and intensity of core NTMs and with-it overall protection
increased substantially over time, especially after 2013, even though
tariffs continued to decline over this period. Overall protection rose
from about 18 percent in 2003 to 68 percent in 2015 when the average
tariff rate had declined to 12.7 percent and with the tariff equivalent
of NTMs, contributing the balance 55 percent. Our results confirm that
core NTM protection dominates the increase in overall trade protection
in Pakistan. The increase in average AVEs of NTM, from 1 percent in 2003
to 55 percent in 2015, is much higher than regional comparators. Also,
the data provided by Niu, et al. (2018) suggests that the AVEs of NTMs
in Pakistan’s major export markets (reflecting health, safety, labour,
and product standards) increased significantly from 2003 to 2015. To
enhance the competitiveness of Pakistan’s exports, reducing tariffs will
undoubtedly help. Still, this paper presents an urgent need to manage
NTMs by reassessing their necessity and coverage, streamlining the
regulatory process, harmonising it with trading partners, and improving
the infrastructure to help Pakistan’s exporters comply with
international standards. Keywords: Non-tariff Measures, Tariff
Equivalent, Protection, NTMs on Goods, Export Competitiveness

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DOI: https://doi.org/10.30541/v60i3pp.251-282%20

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