The Index classified our economy as ‘most unfree’. It goes without saying that the ranking is below all our competitors in the region and sadly enough it is also lower than a large number of least developed countries (LDCs). It would have been easy to dismiss the Index rating as biased, but several other publications and research works, regarded in repute, corroborate the findings. A publication by the Institute for Technological Advancement and another recent study by FAO gave similar ratings to the country’s trade regime.
A cool-headed assessment of why the country has been relegated by the world on a lower position, than its economy deserves in a globalized world would indicate that the faults and follies are unfortunately of our own making.
There are host of unpleasant things one can point to: Less than fair conduct of our entrepreneurs in terms of dealings with international trading partners, lack of transparency and low quality of statistical economic data would be some.
But another aspect generally overlooked is probably our high WTO bound rates that has pushed the country in the dark corner far behind other competing countries. (The bound rates are the maximum tariff rates notified by a specific country. It implies that a country has committed to WTO not to raise tariff rates above their notified rates. Any violation of bound rates is considered illegal).
The bound rates notified to WTO by Pakistan are 100-150 per cent in case of agricultural products and 60-70 per cent for industrial goods. These rates fall poles apart vis-à-vis the applied tariff rates in both those categories in the country. Astonishingly as it is, one is apt to ask what makes Pakistan keep such a wide gap between applied and bound rates of tariff? Commerce Secretary, Tasneem Noorani has an answer: “They provide us a cushion and a space to maneuver with negotiators”, he told this scribe.
The Secretary was taken aback when his attention was drawn to the lower ranking on the index of the Wall Street Journal. He contended: “The country is committed to the goal of more liberal trade environment and the government is in the continuous process of re-evaluating specific policies and making amendments where necessary”, He, however, felt no compulsion to revise the bound tariff rates in the near future. He argued that there were conflicting opinions on the issue, but he did not thankfully stick to his guns and added: “We may re-evaluate it if and when there is a need”.
Did Pakistan gain from sticking to high bound rates in terms of better market access, multilaterally or bilaterally, was not elaborately clear. But the Secretary Commerce hinted at the country’s growing participation in trade negotiations at all levels.
And one of the measures to gauge this (the Secretary did not say this) is the increasing traffic of high-ranking functionaries to and fro, other nations. The participation of officials of trade and commerce in trading forums (at public cost) is hardly an end in itself. It should be aimed at putting the country on investment map of resource surplus countries, to attain better market access for our products and also to achieve for the country a role in international forum that match its size and potential.
In this long drawn out expensive process, the country has attained a higher level of presence at WTO and in some of its sub-committees. It is also reasonably active in G-20 along with India, China, Brazil, Argentina, Mexico, and others. (G-20 is a group of developing countries articulating interests of those nations).
The visibility at forums of economic diplomacy, however, may earn better dividends if the country would initiate measures to improve its image and its ranking on influential indexes. A more favourable market friendly image of the country would also improve its chances of emerging as a preferred destination for prospective international investors.
Pakistan so far has not much to show in terms of making inroads in European or American markets. On the contrary the country’s access has actually been curtailed due to the erection of non-tariff barriers (imposition of anti- dumping duties on textile exports from Pakistan to European Union).
Commenting on anomalies in commitments and conduct of WTO member countries Dr Supachai Panitchpakdi expressed disappointment last week when he met a select group of visiting journalists from various countries including Pakistan, in Geneva. “We need to ask ourselves if we see multilateral trading system as beneficial and if the answer is in positive than we must work to make it a success”, he told the group which included this scribe from Dawn.
Chaudhry Mohammad Saeed, President Federation of Pakistan Chamber of Commerce and Industry (FPCCI) thought that the private sector had yet to educate itself over the intricacies of multilateralism in world trade. “Private sector’s interaction is not much at global forums. Before we formulate our point of view on specifics there is a need for capacity building”, Saeed admitted.
“You cannot really expect an active entrepreneur to follow such complicated developments on his own. We need some backup infrastructure to feed us with information that is relevant to our businesses”, he argued. “To this end we are working on a project to create a research centre”, he disclosed.
Coming back to the gap between bound and applied tariff rates. Many developing countries today operate within space of five per cent in-between applied and bound rates. In Pakistan the gap is as wide as 40 to 100 per cent. This gapping hole has led to create distortion and failed to deliver tangible benefits to the economy.
It would be appropriate if commerce ministry higher- ups take stock of the situation and re-notify more realistic bound tariff rates to WTO on the one hand and review even the level of applied tariff rates in the country, in comparison with India and other regional players. It may be mentioned that tariff rate in India at its highest is 20 per cent in industrial products, whereas in East Asian economies they are less than 10 per cent.