Role of Import Tariff in Export Promotion in Pakistan: Evidence from Disaggregated Data at HS8

Abstract

Trade plays an important role to boost an economic growth of a country. The research aims to access how Pakistani exports are influenced by the trade policies, fluctuations in the current and the global economy. The study explores whether high import tariff increase the cost of production, discourages exports, reduce the competitiveness, how the fluctuated exchange rate impact on the trade flows and how the global economic condition impact on the export condition of Pakistan. For this purpose, we employed this study by using the annual data of Pakistan from 2004 to 2020 with the help of fixed effect model (FEM). The novelty of this study is the usage of the 8-digit HS level product data of exports (EXP). The results from FEM stated a negative but significant impact of import tariff (ITR) and exchange rate (EXR) on the imports. The outcomes stated that increase in the ITR enhance the cost of production; reducing the EXP. Further, due to the heavily reliable on the imported raw material, the cost of production increases that reduces the EXP. Moreover, the global GDP has an insignificant relationship with the EXP of Pakistan. This study underscores the importance of the balanced trade policies, exchange rate stability and global economic situation in shaping Pakistani exports performance. Also, we concluded the valuable insights from this study to achieve a sustainable economic growth.