Major exports and imports
The main exports and imports
| Exports | Imports |
|---|---|
| cotton goods: textiles, yarn, garments, towels, bed-linen (the biggest share, about half of export earnings) | petroleum and oil products (the largest single import) |
| rice, fruit and vegetables, fish and shrimp | machinery and transport equipment, electrical goods |
| leather goods, sports goods, surgical instruments, carpets | chemicals and fertiliser, medicines |
| cement and some chemicals | edible oil, tea, pulses, sometimes wheat and sugar |
| iron and steel, plastics, coal and some minerals |
Changes in recent years
Pakistan used to export raw materials (raw cotton, rice, jute) and now exports more manufactured goods (garments, textiles, leather and sports goods), which have more value added. However, cotton textiles still dominate, so exports are not diversified. Imports have grown faster than exports (more oil, machinery and food), so imports usually exceed exports. The value of both has increased with inflation and the fall of the rupee.
Shares (approximate, they change yearly). Cotton products give well over half of exports; rice a few per cent to about 7%; leather about 6%; sports goods about 2%.
Why countries trade. No country has everything it needs; trade lets each specialise in what it does best, brings in machinery and technology, makes jobs, encourages industry and can raise GNP.
GDP and GNP
| Term | Meaning |
|---|---|
| GDP (Gross Domestic Product) | the total value of all the goods and services produced inside a country in one year |
| GNP (Gross National Product) | GDP plus the net income from abroad (for example remittances and profits sent home by Pakistanis overseas, minus payments sent abroad by foreigners) |
Difference: GDP counts what is produced in the country, whoever owns it; GNP counts what is earned by the country's people, wherever it is earned.
Effect of trade trends on the balance of trade and economy
- The balance of trade is the difference between the value of exports and imports. If imports exceed exports, there is a trade deficit (negative balance); if exports exceed imports, there is a surplus.
- Pakistan usually has a trade deficit because of large oil and machinery imports. This uses up foreign exchange reserves, weakens the rupee, and forces borrowing (debt) and IMF help, which raises prices (inflation).
- Ways to reduce the deficit: raise exports (more manufactured and varied goods, new markets), cut imports (replacing some with home production, restricting luxury goods), encourage remittances and investment. The Export Promotion Bureau (later the Trade Development Authority of Pakistan) helps exporters to find markets and enter trade fairs, and export processing zones and Gwadar (close to the Gulf and a route for Central Asia) are meant to raise exports.
- Higher exports (especially manufactured goods) improve the balance, bring foreign exchange, and create jobs; remittances also help the balance of payments.
Pakistan's trading partners
| Partner | Pakistan exports | Pakistan imports |
|---|---|---|
| USA | textiles and clothing, rice, leather, sports goods | machinery, aircraft, cotton, chemicals |
| UK and EU (Germany etc.) | garments, home textiles, leather | machinery, chemicals, medicines |
| UAE | rice, textiles, fruit, meat | oil, gold and other goods (a re-export hub) |
| Saudi Arabia | rice, fruit, textiles | crude oil (a major source) |
| China | cotton yarn, leather, sesame, copper | machinery, electronics, chemicals, fertiliser (China is the largest source of imports) |
| Afghanistan | food, textiles, medicines, transit goods | fruit, coal |
| Bangladesh and India (restricted trade) | cotton, cement (to Bangladesh) | tea, jute, some goods |
Factors that promote or hinder trade
Promoting trade: good transport and ports, trade agreements, competitive prices and quality, stable exchange rates, government support (export rebates), and trading blocs that Pakistan belongs to.
Limiting trade:
- Trade barriers: tariffs (taxes on imports), quotas (limits on quantities), and standards.
- Trading blocs: the EU, NAFTA, ASEAN and others give low tariffs among their members, which can disadvantage outsiders. Pakistan belongs to SAARC (SAFTA, but trade is small because of political tension), ECO (Economic Cooperation Organisation) and the WTO (World Trade Organization, set up in 1995 to replace GATT and to reduce trade barriers); it gets preferential access to some markets (such as GSP+ in the EU).
- Currency exchange rates: a weak rupee makes exports cheaper (helping sales) but imports dearer (raising the cost of oil and inflation); unstable rates harm planning.
- Other problems: low-value exports and a narrow range, energy shortages, security and political tension (such as with India and Afghanistan), poor infrastructure, and the competition from China, India and Bangladesh.
Why is it difficult for a developing country such as Pakistan to increase its share of trade? It exports low-value raw and semi-finished goods whose prices fluctuate, but imports expensive manufactured goods and oil; it has limited capital and technology, weak infrastructure, and barriers in rich countries' markets, and competitors with cheaper or better goods.