The Tariff Policy envisages invoking the Federal Government Rules of Business, 1973, which states that the “Tariff policy and protection regime” is the function of the Commerce Division. This aspect has been raised many a time in the past also, but no tangible action was taken. So, tariff setting remained with the FBR, except in cases where individual references were made to the FBR in cases of tariff protection/removal of tariff and fiscal anomalies.

Since the policy now envisages to invoke the Rules of Business 1973 which would involve tax measures to the extent of customs duties and other indirect taxes for grant of tariff protection and removal tariff and fiscal anomalies, would require the approval of the National Assembly. As the function once invoked would fall under the purview of a money bill as per the Article 73(2)(a) of the Constitution.

Moreover, modification in taxes and duties by the M/o Commerce (MOC) would require an enabling act without which the role of MOC will again be confined to advisory and not mandatory. Besides, policies without legal and statutory strength only remain guidelines and cannot be implemented as such to achieve the desired objectives. Same is evident from the outcomes of the Strategic Trade Policy Frameworks announced by the ministry. Only those measures are operationalised, which are implemented through trade policy orders. The Tariff Policy needs to enacted under some legal frame work/statute to make it practical and implementable. Without that, it will continue to a mere policy with no enabling legal force.

The policy very naively and briefly, inter alia, describes the objectives, principles and policy guidelines for its implementation. However, the policy is silent on the benefits and targets to be achieved by it and how would it incorporate the objectives of other policies viz. industrial, fiscal, agricultural etc. For, tariff policy is not merely about tariff protection to the indigenous industry but has to reflect the government’s overall economic and fiscal policies as well. The instant tariff policy seems to have taken a very narrow view of the affairs. Setting up of the Tariff Policy Board (TPB) to be chaired by the Commerce Minister/Advisor with representatives of other ministries and divisions tantamount to creating another high-level bureaucratic hurdle in the process undermining the policy itself. The TPB should also include members from Pakistan Business Council and concerned business associations.

A careful analysis of Pakistan Customs Tariff reveals that there are certain raw materials and inputs that are used in the manufacturing of competitive and sophisticated/high value-added products. However, they are still subject to statutory customs duty rates, as they have never been used in the production of sophisticated/high value-added products, so far in the country. Neither the industrial nor the trade policy has prioritised such industrial sectors/products. In other words, there exists an anti-export bias in the tariffs for such sophisticated/high value-added and internationally competitive products.

Generating employment opportunities by attracting efficiency-seeking investment in the manufacturing sector by making tariff regime transparent and predictable is a good step. However, it is compromised, inter alia, due to poorly negotiated Free Trade Agreements, ineffective exchange rate management, arbitrary and irrational fixation energy tariffs and POL prices and under-invoicing. Tariffs are not only a tool for tariff policy measures, but they also play a very significant role in resource allocation, especially in a country with scarce resources. As stated above the tariff policy should not be considered in isolation; it has to be in line with the other macro policies with prioritised objectives considering the current economic situation.

As regards the simplification of tariff structure by reducing exemptions and concessions, the same was effectively undertaken by the Tax Reforms Committee in the FBR in 2016-17. A large number of SRO were withdrawn, translating them into the First and Fifth Tariff Schedules Customs Act, 1969. The policy also lays emphasis on timebound protection to the industry, which will not be possible without stabilising the factors other than tariffs which impact the level of effective tariff protection to the industry. The recent depreciation of Pak Rupee has already reduced the protection levels of some industries to below peril points and for some has granted unintentional windfall profits. For realistic protection measures, the policy has to be flexible. Section 8(3) of the National Tariff Commission Act, 2015 requires it to periodically review the effects of its recommendations on tariff protection and trade remedy measures.

The Pakistan Customs Tariff already stands cascaded in an extensive exercise on the Rationalisation of the Tariff Structure conducted in the NTC with participation of FBR and experts from AERC (Applied Economic Research Center), Karachi in 1992. It was reconsidered by the NTC again in 2015-16 updating the cascading according to the economic classification of goods viz. primary, secondary, intermediate and finished goods with further classification as locally and not-locally available category. It just needs to be made public and implemented.

The concept of strategic protection in infancy stage to the industry is already covered under the Article XVIII of GATT 1994. Pakistan has to invoke the provisions of the said article. The article provides special dispensation for the developing countries under the Special and Differential Treatment for developing countries, to which emphasis was also laid in the mini ministerial WTO conference held in Shanghai on November 5, 2109.

The concept of regulatory duty (RD) administered by the FBR is an ad hoc measure. The RD imposed under section 18 of the Customs Act, 1969 requires an analysis considering the implications of the levy. However, FBR levies RD, as per its charter for, revenue purposes only. Besides, it does not possess institutional expertise to undertake economic and protection analysis. Pakistan has already enacted the Safeguard Measures (Amendment) Act, 2015, which amends the Safeguard Measures Ordinance, 2002, in line with WTO Agreement on Safeguards, read with GATT 1994 Article XIX on Emergency Action on Imports on Particular Products. The levy of RD under Section 18 of the Customs Act, 1969 should be restricted, as also advised by the IMF and the World Bank. Moreover, for the balance of payments and revenue issues, Article XVIII on Governmental Assistance for Economic Development also provide unique and differential treatment for developing countries. The government should e the said article.

The overall assessment of the policy reveals that most of the measures proposed in it are either have already been taken are in place. The policy is thus an old vine in the new bottle. Moreover, why the government had to wait so long implement various measures and that too through the budget for 2020-21. There is either dearth of governance or lack of information at the operational level. However, the trade and industry should actively participate and aggressively pursue resolution of their issues about tariffs and competitiveness based on economic, financial, and legal analysis through the tariff policy.