Page 36 - CMA Journal (Sep-Oct 2025)

Focus Section

Local industries are particularly affected by rapid surges
in international competition and the loss of domestic
market share, especially in the automobile and light
industrial sectors. Widening trade deficits and revenue
shortfalls further complicate tariff reform efforts.
Financial data indicates that the government anticipates
a Rs. 512 billion income shortfall in the coming year,
which could strain the overall economy. Although
increased import volumes may eventually offset the
short-term budgetary gap, the immediate pressure on
the budget remains substantial. A national tariff policy
should aim to reduce manufacturing costs and enhance
the competitiveness of local industries to support
industrial growth (Rosenfeld, 2017). The following are the
key challenges that must be addressed to make trade and
tariff policies sustainable.

1.1 Corruption and inefficiency
Pakistan faces severe issues of corruption and inefficiency raw materials and equipment (Parnell et al., 2015).
in trade and tariff implementation at the state level. In Pakistan should similarly support SMEs to expand and
some cases, organizations resort to unofficial methods to access international markets.
expedite tariff payments or seek exemptions, which
reduces system efficiency and fairness (Awasthi & Opportunities for a Green and Efficient
Engelschalk, 2018). The Asian Development Bank (ADB) Trade and Tariff System
ranked Pakistan 122nd on the World Bank's Ease of Doing
There are numerous key opportunities to develop a green
Business Index for cross-border trade in 2020. This
and efficient trade and tariff system in Pakistan.
ranking adversely affected companies, increased overall
Rationalizing the trade and tariff structure will be central to
expenses, and hindered foreign investment.
achieving long-term economic and industrial goals.
1.2 High Tariffs on Consumer Goods and Imports Pakistan will be better positioned to capture new markets
and attract foreign investment if it addresses trade and
High consumer and critical import tariffs remain a major
tariff obstacles and establishes a streamlined tariff system.
concern. Consumer costs in Pakistan have risen due to
By tackling these challenges, trade and tariff reforms will
imports of food, petrol, and gadgets. For example, import
create opportunities for sustainable industrial growth.
tariffs increased wheat and pulse prices by 12% in 2020.
These reforms offer the following benefits:
Rising consumer prices negatively affect domestic
demand and consumption, particularly for low-income • A strong rationale for joining the Regional
households who spend a higher share of their income on Comprehensive Economic Partnership (RCEP), which
essentials. According to PIDE, the lowest 20% of aims to become the largest trade group globally and
households spend up to 40% of their income on food and compete with other major Asia-Pacific economies.
necessities, which import tariffs disproportionately affect.
• Enhanced opportunities for economic integration
1.3 Effect on Small and Medium Enterprises with global markets, allowing Pakistan to leverage
regional developments effectively.
High raw material costs and inefficiencies in the tariff
system hinder Pakistan’s SMEs. Unlike large enterprises • Implementation of new reforms will boost Pakistan’s
with economies of scale, SMEs often lack the resources to participation in global trade and value chains.
cover high tariffs, which limits their ability to compete in • Stronger positioning to promote Pakistan as a
domestic and foreign markets. In 2021, 63% of Pakistani "China+1" manufacturing destination, attracting
SMEs cited tariffs as a key constraint on growth, according international businesses seeking to diversify supply
to the ITC. Case studies from emerging economies chains beyond China.
demonstrate how tariffs can impede SME growth. For
instance, projected tariff reductions for SMEs in Vietnam By expanding its focus beyond South Asia, Pakistan can
have enhanced their global trade opportunities. The USA secure a significant role in global supply networks. These
and China, as major global economies, continuously reforms will support the transition to a more
adjust their trade and tariff policies, creating competition export-oriented economy, promoting economic
between SMEs in both countries due to differing tariffs on diversification and resilience.

34 ICMA’s Chartered Management Accountant, Sep-Oct 2025