ABSTRACT
This chapter uses the PAKREG model developed in the previous chapter to examine the effects of trade liberalization on the economy of Pakistan at the national and regional levels, both in the short run and long run. In doing so, the chapter adds to the existing CGE literature on Pakistan in several ways. First, it quantifi es the effects of trade liberalization on Pakistan’s domestic industry at a highly disaggregated level, using counter-factual simulations with the model. This also allows us to focus on domestic industries, particularly key export industries, on a case-by-case basis. Among the export industries, attempts have been made to capture the effects of trade liberalization on the cotton and textile related sector because while this sector has benefi ted from the abolition of textiles and clothing quotas since 1 January 2005 in terms of increased international market access, it has also been exposed to greater competition from the other major exporting countries of textiles and clothing (see Chapter 2). Second, the chapter links trade liberalization to regional disparities in Pakistan, as opposed to the previous studies of trade liberalization and tariff cuts in Pakistan, which have focused on income inequalities, poverty and national welfare, whose relationships with trade liberalization are well documented in the literature. Finally, taking advantage of the highly disaggregated industry results, attempts have been made to present the results in such a manner that they can be of use to various groups of interested people, including importers, exporters, investors, industrialists, economic analysts and governments.
