Major Exports & Imports
• The concept of buying/selling or exchange of goods and services.
• Internal trade is the exchange of goods and services within a country.
• External trade is the exchange of goods and services from one country to another.
Importance of Foreign Trade:
• It increases and encourages economic activity.
• It helps in achieving the economy of scale.
• It creates employment.
• It opens doors for product specializations. E.g. cotton products are Pakistan’s specialty.
• It stimulates IT and capital.
• It encourages countries on producing value-added products.
Import & Export
• When a country buys goods or services it is known as an import.
• When import happens, the foreign exchange leaves the country.
• When a country sells goods or services it is known as export.
• When export happens, foreign exchange comes to the country.
Visible & Invisible Trade:
• Visible trade is the exchange of goods while invisible trade is the exchange of services.
Exports of Pakistan:
• Primary exports include fish, cotton, rice, fruits, and vegetables.
• Processed exports include dries fish and cotton yarn.
• Manufactured exports include sports goods, garments, carpets, cotton textiles, and surgical instruments.
Trend of Export:
• Initially, Pakistan was exporting primary goods but now it is more focused on exporting manufactured goods.
• Manufactured goods yield greater profit as they are value-added items.
• Export helps Pakistan in earning foreign exchange and improving the Balance of Trade.
• It is also stimulating industrialization.
• It is creating employment and increasing economic activity.
• Pakistan export base is very narrow.
• Pakistan’s 61% of export is through rice, leather and cotton.
• Most of Pakistan’s export items are cheap from cottage and small-scale industries.
Imports of Pakistan:
• Pakistan imports capital goods e.g. machinery.
• It imports raw materials like iron ore, coke, manganese and crude oil.
• It also imports consumer goods including fertilizer, wheat, electrical appliances and sugar.
Trend of Import:
• Pakistan is importing from around 100 countries.
• It imports most from Kuwait, Saudi Arabia, Japan, USA, UK and Germany.
• This huge import is creating a negative balance of trade.
• Stimulation of industrialization is the major reason for the import.
• Unfavorable exchange rate.
• Infrastructure and green revolution.
GDP & GNP
• It stands for Gross Domestic Product.
• It defines any country’s economy in geographical terms.
• It represents the total value (monetary) of all goods that are produced in a country in a period.
• It stands for Gross National Product.
• It defines the country’s production of goods by locals.
• It represents the total value (monetary) of all goods and services produced by the resources owned by the locals of a country in a period.
Trading Partners of Pakistan
Trading Partners of Pakistan in Import:
• Pakistan imports from the USA wheat, oil, vegetable, and machinery.
• Pakistan imports from Germany electrical appliances and machinery.
• Pakistan imports from the UK fertilizers, machinery, and electrical appliances.
• Pakistan imports from Saudi Arabia, petroleum.
• From Malaysia, Pakistan imports edible oil.
• From Japan, Pakistan imports electrical appliances and machinery.
• From Sri Lanka, Pakistan imports tea.
Trading Partners of Pakistan in Exports:
• Pakistan exports surgical equipment, carpets, and rugs to the USA.
• Pakistan exports carpet, rugs, cotton textile, and surgical equipment to Germany.
• Pakistan exports surgical equipment, raw cotton, rugs, and carpet to the UK.
Saudi Arabia & UAE:
• Pakistan exports ready-made garments, spices, and rice to UAE and Saudi Arabia.
China & Hong Kong:
• Pakistan exports cotton yarn to Hong Kong and China.
• Pakistan exports fish and its products to Japan.
• The east land route of Pakistan involves India which is not feasible due to bad relations.
• On the west are Bolan, Khyber and Khurram Pass. But it still lacks adequate road links to connect Pakistan with CAS through Afghanistan.
• On the north is China, Karakoram Highway has strengthened trade between both countries.
• On the south-west is Iran, there is RCD that connects Pakistan with Turkey through Iran, but the road is not properly built and maintained.
• The topography for trade is inadequate as there are steep slopes, mountains etc.
• There are very few passes.
• Trade through land routes is costly because of taxes.
• Trade through land routes is slow and vulnerable.
• Sea routes are preferred for trade because it is cost-effective.
• It also provides a shorter route to Europe as compared to the land route.
• Pakistan has developed ports e.g. Bin Qasim port.
• The sea roots function all year round.
• It also connects Pakistan to the middle east through the Arabian sea.
• It can handle large consignments.
• It is slow and time-consuming as compared to air routes.
• It cannot handle urgent trade.
• It cannot reach inside cities and inland areas.
• It cannot reach landlocked countries.
• It is inadequate for perishable goods.
• It is the fastest trade route.
• It is suitable for small consignments and lighter items.
• It is best for urgent deliveries.
• It can reach inland areas and cities.
• It can reach landlocked countries.
• It is expensive.
• It is not suitable for heavy consignments.
• It is not suitable for perishable items.
Balance of Trade
Balance of Trade:
• It represents the value difference between exports and imports of goods.
Balance of Trade = Value of export goods - Value of import goods
Balance of Payment:
• It represents the value difference between exports and imports of goods and services.
Balance of Payment = Value of export (goods + service) - Value of import (goods + services)
Pakistan’s Balance of Payment/Trade:
• It was negative because of the following reason.
• There was more value of imports than the value of exports.
• Pakistan imports capital goods, luxury goods, consumer goods etc.
• Pakistan also imports crude oil and its price in the international market is constantly increasing.
• The population has increased and so the need for imports.
• The exchange rate of Pakistani rupee against USD and Pond is unfavorable.
• Pakistan generally exports agro items that have less value.
• Foreign governments have placed restrictions on Pakistan trade e.g. child labour issue and environmental issues.
• The competition is increasing in the cotton textile export. E.g. Thailand.
• The list of trading partners of Pakistan is small.
• Increase in load shedding.
• Instability in the political condition of Pakistan.
• Bad infrastructure.
Steps to improve Balance of Trade:
• Pakistan should focus on doing more export.
• The country should restrict the value of imports.
Steps to Increase Exports & Restrict Imports:
• Pakistan should focus on producing more value-added products.
• Quality control should be strict to guarantee export quality products.
• The supply needs to be reliable.
• Pakistan should seek to form more trade partners.
• The export goods should have diversity.
• Pakistan should improve the infrastructure by the construction of more dry ports and seaports.
• Child labour should be banned.
• There should be more export processing zones.
• The political situation needs to be stable.
• The quality of education should be improved to increase skilled labour.
• Imports should be restricted by imposing high tax on them e.g. luxury items.
• Locals should be encouraged to purchase the Pakistan made products.
• Tariffs should be high to discourage importers.
• Awareness programs should be initiated on the negative effects of imports.
• Three types of trade barriers can be imposed:
• Tariffs – that is the tax on imports.
• Trade embargoes – that is the ban on elected products.
• Quotas – that is the physical quantity of goods and restrictions on their import.
Foreign exchange & Exchange Rate:
• Foreign exchange deals in other countries’ currencies.
• Foreign exchange can be earned by visible and invisible exports.
• It can also be increased by remittances from Pakistani locals residing abroad.
• An exchange rate represents the value of one currency with respect to the other.