Cabinet will approve tariff structure to promote trade

ISLAMABAD: In a bid to fulfill the promise to develop National Tariff Policy during first 100 days of PTI-led regime, the federal cabinet is scheduled to meet on Thursday (today) under chairmanship of Prime Minister Imran Khan for granting approval for rationalisation of tariff structure with the aim to promote trade rather than generating revenues.The federal cabinet will also consider approval for placing fencing and lighting of Pak-Afghan border with utilisation of multi-billion rupees.The cabinet will take up eight agenda items in today’s meeting in the chair of PM Imran Khan including allocation of technical supplementary grant to Pakistan Broadcasting Corporation (PBC), re-constitution of search committee for appointment of Vice Chancellor Shaheed Zulfikar Ali Bhutto Medical University Islamabad, appointment of three non-executive independent directors in Central Power Purchasing Agency (Guarantee) Limited (CPPA), appointment of Member Finance National Highway Authority (NHA), appointment of technical member Drug Court Balochistan Quetta, seeking approval for National Tariff Policy, fencing and lighting of Pak Afghan border and introduction of Gilgit-Baltistan Governance Reforms.According to proposed National Tariff Policy which is being presented before the cabinet, the Ministry of Commerce sources said in last decade all the 20 fastest export-growth economies of the world had reduced import tariffs while Pakistan increased by 11% that resulted into de-industrialisation and its share shrank from 26.4% of GDP in FY2010 to 20.9% in FY2017. Subsequently, the share of exports slashed down from 13.5% of GDP in 2010 to 9.1% in 2016 that demonstrates that the adverse impact of higher tariffs on the economy was quite visible.The import tariff always played critical role for ensuring optimal allocation of resources, protection of domestic industry against foreign competition, improving competitiveness, generating employment, attracting and protecting investments, improving balance of payments and revenue generation. The experiences of leading export-led growth economies establish a correlation between the competitiveness and tariff rationalization. During the last decade, it is important that the tariffs are employed as a trade policy instrument rather than a revenue generation tool.During the first 100 days, the Ministry of Commerce and National Tariff Commission may develop a National Tariff Policy, which aims at: (a) making the tariff structure a true reflection of trade policy priorities; (b) improving competitiveness through duty-free access to imported raw materials; (c) rationalising the tariff structure for enhancing efficiencies; (d) reducing the relative “disincentive” for the exporting activities; (e) improving the growth potential and increase employment opportunities by attracting investment into efficient industries; (f) limiting the negative impact on budgetary revenue and adjustment costs to the domestic industry by phasing in the tariff reforms; (g) encouraging value addition through the principle of cascading of tariffs; and removing anomalies in the tariff structure which is causing distortions between sectors and in the value chain of the same sectors.The Tariff Policy should be based on the principles of (a) employing tariffs as an instrument of trade policy rather than revenue, (b) maintaining vertical consistency through cascading tariff structures (increasing tariff with stages of processing of a product), (c) providing time-bound ‘strategic protection’ to the domestic industry against the foreign competition during the infancy phase, and (d) promoting competitive import substitution through time-bound protection, which will be phased out to make the industry eventually competitive for export-oriented production, the official sources concluded.

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