Exploring Pakistan

EXPLORING PAKISTAN’S REGIONAL ECONOMIC COOPERATION POTENTIAL
by A. R. Kemal

I. INTRODUCTION
Despite GATT and now WTO, regional trade arrangements have proliferated and the most important new initiative has been NAFTA. Whether such regional arrangements result in the improvements in welfare of member countries and the world at large or not has been widely debated [see for example, Viner (1950), Meade (1955), Lipsey (1957), Corden (1972), Kemp and Wan (1976), Kowalczk (1990), Bhagwati (1971, 1993), Melo and Panagariya (1993) Anderson and Blackhirst (1993), Baldwin and Venables (1995), Bhagwati and Panagariya (1996), Srinivasan (1993, 1997), Vamvakids (1998) Bhagwati, Krishna and Panagaraya (1999), Clausing (2001) and Panagariya (1999, 2000)]. The proliferation of Preferential and Free Trade Areas, however, has resulted in what Bhagwati (1995) calls a “Spaghetti Bowl” of tariffs; each country is applying different rates of tariffs for a product for different countries. The free trade intentions of the regional trade arrangements, therefore, may have resulted in a chaos leading to reduction in the welfare [For an excellent survey of regional trade arrangements, see Panagariya (2000)]. Nevertheless, though the best way of optimizing gains from trade is the multilateral trade framework, in the presence of regional arrangements the countries that are not part of any regional trade groupings will be denied the advantage of higher levels of trade. Pakistan is a member of the two regional groupings, viz. South Asian Association for Regional Cooperation (SAARC) and Economic Cooperation Organization (ECO) but so far both of them have met with limited success. The intra-regional trade has been around 4 percent of the total trade in both the SAARC and the ECO although in both the organizations exports of member countries receive preferential treatment. The Islamabad SAARC summit declaration promises the South Asian Free Trade Area (SAFTA) over not very distant future, and...