WTO's trade liberalization: Implications for Pakistan wheat economy

This study of Pakistan's wheat crop develops econometrically estimated supply and demand functions, identifies government policies and interventions, estimates welfare effects associated with existing interventions and analyses implications of the implementation of WTO's trade liberalization in the country and abroad. The study points out that wheat crop had been subjected to 'price tax-cum-import subsidy' regime during 1985-1995 and 'price support-cum-import tax' regime during 1995-2005 study sub-period. These interventions were found associated with welfare effects - higher losses to consumers (Pak Rs.967.95 million per year) than gains to producers (Rs.918.91 million per year) during the latter period. Free trade simulation results showed greater gains to consumers than losses to producers. If trade liberalization was introduced in world market, it would have resulted in additional gains (Rs.1619.68 million) to consumers than losses (Rs.153 7.01 million) to producers. Based on the analysis, the study presents the following recommendations. First, government interventions should be minimized and the trend of narrowing down gap between domestic and international prices should be kept continue till the two prices arrive at the same level. Second, supply of various fertilizers, availability at appropriate times and use on crops in recommended proportions should take prime attention in formulation of input market policy. Third, trade liberalization process should be stepped up, and more specifically, world prices should be allowed to prevail in domestic wheat market. Fourth, Pakistan should also work for implementation of WTO's induced trade liberalization on global basis and especially in major global economies of US, EU and other OECD countries. Fifth, Government of Pakistan should gradually reduce its role in trading through State Trading Enterprises (STEs). Rather it should step up its role as facilitator of trad e as envisaged in the 'Green Box' of Agreement on Agriculture and other WTO agreements. More importance should be given to research, development and out-reach areas and to the introduction and adoption of international quality standards developed by FAO/WHO's Codex Alimentarius Commission.