Export Policy in Pakistan

One of the main objectives of Pakistan's export policy hasbeen the promotion of exports of manufactured goods. This is anobjective which many under¬developed, predominately primary-exportingcountries have in common because of their interest in exportdiversification. The general arguments used to justify such a policy,e.g., improvement in the terms of trade and increased stability ofexport proceeds—will not, however, be discussed in this paper1.Attention will instead be focussed on the economic consequences of thespecific measures adopted by Pakistan, namely, a combination of exportduties and subsidies which discriminate in favour of processed goods andagainst raw materials. The fact that in Pakistan the chief beneficiariesof discrimination have been manufactures of jute and cotton, productswhich also constitute most of the country's raw material exports,facilitates the economic evaluation of this policy. It can thus beassumed that if jute and cotton were not exported as manufactures theycould be exported in raw form, or in other words, that the problemcon¬sists in selecting that combination of exports in raw andmanufactured form which maximizes net foreign exchange earnings.Furthermore, the textile industry is not a very good case for applyingthe external economy argument (i.e., subsidies to industries whichprovide training to the labour force in new skills, etc.,) be¬cause theindustry would exist in any case to supply the internal market,economies of scale are limited and the skills employed are fairlyrudimentary. In the follow¬ing, all our discussion will be concentratedon the jute and cotton situation, the special problems of othermanufacturing fall outside the scope of our analysis.