Trade Barriers of Pakistan

Abstract

A trade barrier is a general term that describes any government policy or regulation that restricts international trade. Most trade barriers work on the same principle: the imposition of some sort of cost on trade that raises the price of the traded products. If two or more nations repeatedly use trade barriers against each other, then a trade war results. Economists generally agree that trade barriers are detrimental and decrease overall economic efficiency, this can be explained by the theory of comparative advantage. In theory, free trade involves the removal of all such barriers, except perhaps those considered necessary for health or national security. In practice, however, even those countries promoting free trade heavily subsidize certain industries, such as agriculture and steel. Trade barriers are usually protectionist; that is, they are erected to protect domestic producers who would not be able to compete successfully with foreign producers in a free market or in free trade. In the basic area tariff barriers, Pakistan is placed at 106 out of 118 countries while India is ranked lower at 115. In non-tariff barriers Pakistan is at number 30 while India is ranked at 50. However, the main impediment to trade in Pakistan is the business costs of terrorism, where Pakistan is ranked 110 compared with 84 ranks given to India. Pakistan is ranked very low at 117 in share of duty free imports. The country was placed much above its ranking as far as the regulatory environment is concerned. It ranks 44th on this count. In fact on business impact on Foreign Direct Investment comes at number 22 out of 118 economies. In the corruption perception index its is placed at 99th place scoring only 2.4 out of 10 transparency points compared with 58th position enjoyed by India that has a transparency score of 3.5 points.