Trade Liberalisation Essential for Economic Growth, a new study

In the long-run economic freedom followed by growth in exports and imports significantly affect economic growth, a new study comparing SAARC economies reveals. According to the study, trade liberalization is a critical factor for economic well-being. Selection of appropriate trade strategy is considered one of the core objectives of any administration especially in the era of globalisation. These findings are result of a study on ‘Trade Liberalisation and Economic Growth: A Case Study of Selected SAARC Member Countries’ by Dr Khalid Mahmood launched by Policy Research Institute of Market Economy (PRIME) – an economic policy think tank.

The purpose of the study is to examine the nature of relationships between trade liberalization and economic prosperity in five SAARC member countries i.e. Pakistan, India, Nepal, Bangladesh and Sri Lanka.

The study implies that removing restrictions on the import of raw materials for industries, facilitating imports of modern ideas and technologies will definitely experience an expansion in domestic product and economic prosperity in region.

According to the study, there is a need of active and tactical trade alliance between SAARC countries. SAARC exports have vulnerable access in international markets due to comparatively higher cost and lower quality. In these circumstances, organized and cooperative regional trade integration is in demand, because intra-regional trade development would facilitate the countries to switch to global market through economies of scale. This access in global markets will allow the region to invest in human development. It is observed that trade relations between South Asian countries, i.e. India -Pakistan and Bangladesh-India are on the rise in recent years but need some more attention.

Quoting the study, Executive Director of PRIME, Ali Salman said that it is interesting that all countries in the SAARC registering significant increase in trade openness have experienced economic growth though Pakistan doesn’t seem to follow the trend as its trade to GDP ratio has remained constant at about 30% in last 30 years. In contrast, this ratio in case of India has dramatically increased from 15% to 50% thus playing possibly a much larger role in transformation of Indian economy in last couple of decades.

Other speakers included Dr. Khalil Ahmad and Dr. Tariq Majeed who endorsed outcomes of the study and suggested further areas of research.   Dr. Khalil attributed politics as part of problem and hindrance in liberalisation. Concluding the discussion Deputy Executive director Dr. Vaqar Ahmed told that Pakistan is fast losing ground on regional trade due to its reluctance in supporting connectivity measures across the region and highlighted that despite political consensus on trade openness, political parties have shied away from taking real steps thus denying opportunities to the people and businesses at large.

The study has been supported by Friedrich Naumann Foundation for Freedom.

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