WTO's trade liberalization and its implications for Pakistan cotton economy

This research paper on cotton economy of Pakistan distinguishes policies and interventions, their welfare effects and implications of the implementation of WTO's trade liberalization on cotton sector. The quantitative analysis of data reveals that cotton crop hanged about 'export tax-cum-export trade' regime during 1985-1995 and 'depressed price-cum-import trade' regime during 1995-2005. Welfare analysis of such policy interventions estimated higher losses to producers (Pak Rs.12648.44 million per year) than gains to consumers (Rs.12463.10 million per year) during 1995-05 period. In case of free trade, simulation results demonstrate greater gains to producers than losses to consumers. If world market was liberalized, supplementary gains in the range of Rs.302.11million to Rs.1616.48 million per year during earlier and Rs.78.50 million to Rs.660.88 million per year during the later period would have occurred at domestic level. Producers' gains would have been higher than consumers' losses in the earlier period and in contrast consumers' gains would have been higher than producers' losses during the later period. In light of analytical results, the following recommendations are made. (i) Government should reduce its interventions and pace of tightening down gap between domestic and international prices to carry on unless they level each other. (ii) There is a need to improve the pace of trade liberalization at domestic level in a way that world prices are permitted to prevail in domestic cotton market. (iii) Pakistan should play active role in WTO's negotiations for early implementation of WTO's trade liberalization on international level and particularly in major global economies of US, EU and other OECD countries. (iv) Government of Pakistan should steadily trim down its role in cotton and shape its role as facilitator of trade in accordance with 'Green Box' of Agreement on Agriculture and other WTO agreements. Mo re investment should be made in areas of research, development, out-reach and adoption of FAO/WHO's Codex Alimentarius Commission induced international quality standards.