Page 38 - CMA Journal (Sep-Oct 2025)

Focus Section
Balancing the Scales: Pakistan’s Tariff Reforms at the

Crossroads of Protectionism and Competitiveness

Tariffs have been the core element of trade policy in term since businesses
Pakistan, which has influenced its economic perfor- would have no incentive
mance. In the past, the country has heavily relied on to innovate, enhance
import tariffs as the main source of fiscal revenue, a habit production, and ascend
that has led to a high level of structural dependency the value chain any
within the economy. This dependency has not been free; longer. Conversely, the
it has led to the discouragement of investment, increased case of export orienta-
production costs, and reduced competitiveness of local tion is concerned with
industries. It is necessary to convert tariffs into a revenue liberalisation and special
generator and a strategic trade-enabling tool to achieve state support. The
sustainable growth and competitiveness worldwide.¹ The international competi-
tariff policy — re-symbolized by efficiency, transparency, tion also compels firms
and export promotion — can help Pakistan develop a to become more
more predictable business environment, facilitate indus- efficient and productive Dr. Azeema Usman
trial growth, attract investment, and promote integration and export receivables
into global value chains.¹ During the 1950s–60s, import enhance the foreign Assistant Manager
substitution contributed to the formation of local exchange reserves and (Research and Publications)
production potential; later (in the late 1960s and early create macroeconomic Saviours, Karachi
1970s), export performance (especially in the textile stability.³,4
industry) contributed to the growth of the industry.
Prudently, tariffs may be used as boosters of economic
However, the low-productivity segments were
entrenched by prolonged protection, weak competition, growth, reducing the price of inputs and improving the
policy uncertainty in certain periods, and the disincentive competitiveness of local industries, especially those that
to upgrade exports. A glimpse through the history of have an export-oriented character.5 Acknowledging this
trade policy in Pakistan indicates periods when protec- fact, Pakistan has made a significant change with the
tion provided interim rents, but no long-term productivi- National Tariff Policy (NTP), which the Federal Cabinet
ty gains were realised unless competitive exposure passed on November 19, 2019. The policy marked a
occurred and complementary policies (infrastructure, change of course because, instead of treating the tariff as
skills, finance) were in place. ² a revenue collection instrument, as was historically the
case, the Federal Board of Revenue (FBR) now treats it as
Balancing Protectionism and
an instrument for industrialisation and export promotion.
Export Orientation The previous version tended to cause informal modifica-
tions, policy instability, and uncertainty in trade, which
The import substitution versus export orientation debate
were detrimental to long-term business planning.
represents two different approaches to industrial devel-
opment. The proponents of the import substitution
To institutionalise transparency and coherence, the NTP
program claim that infant industries are not yet at the
established the Tariff Policy Board (TPB) and the Tariff
level where they can compete globally and thus a protec-
Policy Centre (TPC) within the Ministry of Commerce. The
tionist policy is needed to develop the infant industries in
TPB is required to develop, revise, and supervise the
terms of scale, experience, and technology. It can also
application of the National Tariff Policy, whereby any
protect employment by providing local manufacturing
changes to customs or regulatory duties are made by
jobs, thereby improving the economy's security against
conducting extensive consultations with stakeholders.
changes in the global market. Moreover, temporary
Such a structural reform is a crucial step toward achieving
protection can help stabilise the balance of payments by
a predictable, evidence-based, and business-friendly
mitigating excessive pressures due to imports during
tariff regime that will support the overall trade and
structural adjustment. However, it can be counterintui-
industry objectives of Pakistan.6
tive to persist with protectionist measures in the long
36 ICMA’s Chartered Management Accountant, Sep-Oct 2025