Tariff Simplification Necessary for Improved Regional Trade

Ministry of Commerce and Textile organized a consultative seminar on National Tariff Policy (NTP) on 26th April 2018 at the Pearl Continental Hotel, Rawalpindi. The purpose of this seminar was to bring together trade experts and stakeholders from academia, think tanks, business community and the relevant government departments to propose recommendations for the upcoming National Tariff Policy 2018-23 being formulated by the Ministry of Commerce and Textile.

In this regard, PRIME proposed following suggestions at the event:

  • Customs tariff should be simpler.
  • In order to catch-up with other competitive countries such as the ASEAN countries, tariffs should be benchmarked to their level within the next 3-5 years.
  • All products, which were subject to zero five years ago, should be restored to the same level.
  • All tariff related SROs should be eliminated for the sake of transparency and simplicity of tariff.
  • Pakistan has FTAs with China and Malaysia. Tariff rates should be brought to the same level as available to those countries so that there is no trade diversion.

Muhammad Ashraf, Director General presented the draft of the NTP 2018-23. He discussed Pakistan’s tariff regime and the inherent issues in it. For instance, it was mentioned that employment of import tariffs as a revenue tool has created numerous distortions and affected the competitiveness of manufacturing. Moreover, disproportionately high protection to several industries has kept the inefficient ones at infancy state and has created an anti-export bias. Multiple duty slabs, concessionary SROs, high tariffs and regulatory duties maintain the complexity of tariff structure. Furthermore, frequent imposition of regulatory duties has contributed to the inconsistency and unpredictability of the tariff structure.

He propagated that during the last decade, all of the 20 fastest growing economies have reduced the import tariffs while Pakistan has been following a reverse trend whereby the import tariffs have increased by 11 percent. Currently, Pakistan has the third highest average weighted tariff amongst the 68 countries having more than US$ 20 billion exports annually. He stressed that the upcoming NTP will focus on:

  • Improving the competitiveness of manufacturing particularly the export-oriented industries through duty free access to imported raw materials and intermediary inputs.
  • Rationalizing the tariff structure.
  • Encouraging value addition through the principle of cascading of tariffs.
  • Limiting the adverse impact on budgetary revenue and adjustment costs to the domestic industry through tariff reforms.
  • Reducing the relative disincentive for the export sector.

He concluded by urging that the duty on the inputs of export oriented industries will be reduced and that the tariff slabs will be re-fixed within two years. Moreover, the infant industries would be provided time-bound protection and the difference in the rates of tariff between the commercial importers and the industrial users of capital goods would be eliminated.

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