Comparing Pakistan’s Trade
openness with India & China:
In 21st century, the concept of Globalization is at its peak. Countries of the
world are integrating and communicating rapidly. In this Global village, every
country wants to empower themselves through economic prosperity and strong
economy. International Trade of goods & services is the most common and easy way
of economic, social, cultural and political integration. Both Domestic as well
as International trade helps to improve living standards, Per Capita Income (PCI),
employment opportunities, overall economic activity, foreign exchange reserves,
and transfer of technology. A country’s Trade openness means Total Exports plus
total Imports divided by total Gross Domestic Product (GDP), which serves as an
indicator of integration and communication with the rest of the world.
In 2000, Pakistan’s Trade to GDP ratio was 28.12% which slightly jumps to 34% in
2012-2013. India’s Trade to GDP ratio stood at 26%, lower than Pakistan in 2000,
but rose more than double and reach to 54.2% in 2012-2013. Similarly, China’s
Trade to GDP ratio rises from 44.24% to 59% in the same period. In last 12
years, the rise in Pakistan’s Exports of Goods & Services as a (% of GDP) is
negligible i.e., 13.44% to 14.15%. While India and China Export of goods &
services as a (% of GDP) rises from 12.82% to 23.88% and 23% to 31%
respectively. However Imports of Goods & services as (% of GDP) for Pakistan
rises from 14.7% to 19.82%, India from 13.71% to 30%, and China from 21% to 29%
respectively.
Besides Pak-China friendship, the volume of Pakistan’s trade with China rose
from $1 billion in 2000 to $12.5 billion in 2012-2013. While India volume of
trade with China grew from $billion to $66.5 billion in the same period. China
and India together constitute 40 % of the world population with China ranks 1st
(1.3 billion) and India rank 2nd (1.2 billion) in the list of most populous
countries in the world. While Pakistan rank 6th in the list with 180 million.
These three countries constitute a big market for trade of goods and services.
India and China is the member of BRICS (Brazil, Russia, India, China, and South
Africa). BRICS poses a great challenge to United States of America.
In the last decade, Chinese Economy grew at an average rate of 10%, and India
6%. Both China and India are quickly emerging as Asian tigers. Both countries
are member of G-20, while Pakistan lagging behind them and just a member of D-8
countries.
Pakistan and India became the founding member of World Trade Organization (WTO)
established in 1995, while China became the 143rd member of WTO in 2001.
Unfortunately bilateral trade between India and Pakistan stands at $2.6 billion.
According to CUTS (Consumer Unity and Trust Society), there is a potential of
$12 billion in textile, leather, fruits and vegetables between India and
Pakistan.
Pakistan should expand its export base. Just 4 items cotton, sports goods, rice
and leather constitute 75% of exports. There is a need to convey message from
Pakistan’s Government to China that concessions in tariff rates from 9.5% to
0.1% covering 90% trading items for Association of South East Asian Nations
(ASEAN) clearly hurts Pakistan’s exports to China. Moreover Pakistan should
promote livestock sector, which contributes 11% to GDP. It accounts 51% to
Agriculture which is greater than combine share of 45% by 4 crops. Research
shows that employment elasticity of livestock sector is 0.89%. We should add
value to live stock sector to make it competitive in export market rather than
sticking to 4 traditional crops Rice, cotton, sugar cane and wheat. According to
a research.Pakistan has a potential of 2-3% additional GDP growth, if Pakistan
adopts prudent and sound trade policy with China and other neighbor countries.