Export Policy in Pakistan

In: The Pakistan development review: PDR, Band 6, Heft 1, S. 57-79

Abstract

One of the main objectives of Pakistan's export policy has
been the promotion of exports of manufactured goods. This is an
objective which many under¬developed, predominately primary-exporting
countries have in common because of their interest in export
diversification. The general arguments used to justify such a policy,
e.g., improvement in the terms of trade and increased stability of
export proceeds—will not, however, be discussed in this paper1.
Attention will instead be focussed on the economic consequences of the
specific measures adopted by Pakistan, namely, a combination of export
duties and subsidies which discriminate in favour of processed goods and
against raw materials. The fact that in Pakistan the chief beneficiaries
of discrimination have been manufactures of jute and cotton, products
which also constitute most of the country's raw material exports,
facilitates the economic evaluation of this policy. It can thus be
assumed that if jute and cotton were not exported as manufactures they
could be exported in raw form, or in other words, that the problem
con¬sists in selecting that combination of exports in raw and
manufactured form which maximizes net foreign exchange earnings.
Furthermore, the textile industry is not a very good case for applying
the external economy argument (i.e., subsidies to industries which
provide training to the labour force in new skills, etc.,) be¬cause the
industry would exist in any case to supply the internal market,
economies of scale are limited and the skills employed are fairly
rudimentary. In the follow¬ing, all our discussion will be concentrated
on the jute and cotton situation, the special problems of other
manufacturing fall outside the scope of our analysis.