Enhancing Pakistan’s Agricultural Sector Exports to India

Abstract

The study aims to identify potentially competitive agricultural products or product clusters for exports to India, probable challenges at the border, behind the border and beyond the border to exploit export opportunities. The study also sets out the defensive strategy to identify vulnerable agricultural product or clusters susceptible to import surges; and suggests recommendation for policy reform to make the vulnerable sector competitive in long run and stave off unfair trade practices during the transition phase. The study employs analytical methodology using the ‘Summary Indicators of Potential’ (SIP) namely ‘Relative Growth Rates of Merchandise Exports and Imports’; ‘Revealed Comparative Advantage (RCA)’; ‘Trade Similarity Index’; ‘Trade Specialization Index’; ‘Trade Intensity Index’; ‘Index of Intra-industry Trade’ and ‘Trade Complementarity Index’ at a dis-aggregated 6 digit level of the Harmonized Systems of Product Classification. Stakeholders’ survey questionnaire, Public Sector Dialogue and Consultation process have also been integral part of this research. The major findings of the study are as under: • The comparison of top importing agricultural products by India and Pakistan reveal import basket similarity as both tend to import vegetable oil crudes (Palm-oil, soya bean oil and sunflower oil), oil hydrogenated, cotton lint, sugar, tea, pulses, lentils, rubber and wheat. However, there is dissimilarity of import items also: India tends to import beans (dry), dry and fresh fruits, silk raw, dates and alcohol beverages; whereas, Pakistan tends to import chick peas, areca nuts (betel nut), jute, garlic, ginger, and food preparations items. While comparative analysis of top export products by India and Pakistan reveal that both are close competitors in rice, cotton lint, buffalo meat, sugar, vegetable products, sesame seed and mangoes. • Pakistan has export competitive edge in tangerines, mandarins, potatoes, molasses, dates, goat and sheep meat, frozen vegetables and dried fruits whereas India has export competitive edge in tobacco (unmanufactured), tea, oil of castor beans, coffee (green), chillies and peppers (dry) and oil essentials. Pakistan can export dates, fresh and dry fruits and wool to India. Similarly, India can export tea, garlic, ginger and vegetables especially during seasonal shortages. The study recommends that managed trade liberation in agricultural trade with India is more prudent policy option for Pakistan. Before transition to full trade liberalization in agricultural sector, the study suggests import quota regime (IQ) under the Pakistan Safeguard Ordinance 2002. The quantum of IQ may be fixed on the basis of average value of last five years import figures in each of tariff line in the agriculture sector. Non-transferable import quota may be awarded on first-come first serve basis on payment of 5 %of the value of quota. On exhaustion of Import Quota, MFN bound rate tariff will progressively be applied. For example, a 10 %increase in imports above IQ limits would entail an increase of MFN applied tariff by 10 %and so on. During this transitory protective regime, the study also recommends addressing structural issues in agricultural competitiveness like focusing on agricultural productivity, developing yield improvement and disease resistant varieties, improving irrigation and water usage efficiency and reducing water wastage, controlling water logging and salinity; improving ASC (Agricultural Supply Chain) and reducing the produce wastages during the sowing, harvesting, storage (cool chain) , and improving infrastructure for packaging and preservation and transportation (reefer and containerized cargo). The other policy recommendations include restructuring of the National Tariff Commission; incentives for cluster farming through legislative cover to facilitate the farmers to join a agri-cluster and get support for agricultural/ farming extension services, credit; and to initiate the Trade Adjustment schemes especially for small agricultural farms and farmers who may become noncompetitive due to trade liberalization with India. The research finding support the trade liberalization efforts with India in agricultural sector as counterfactual policy of insulating domestic agriculture from import competition would be poverty and mal-nutrition inducing for Pakistani consumers especially for those in lower two quintiles of population (poorest 40 %) who spend almost 50-70 % of their income on food.