Trade Liberalization in South Asian Countries

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Introduction

Trade and economic growth has a strong relationship, for attaining sustainable growth trade is must. Trade helps countries to use its resources efficiently. Trade is beneficial to all countries weather one country is less efficient in its resource utilization[1]. It is common thinking that trade is only beneficial for developed nation but it is not the true.

Throughout the history, civilizations engaged in trade. Trade policy can be categorized into free trade (Liberalized trade) policy and Protectionist trade policies. There always been a conflict between free trade supporters and protectionists. In history Mercantilists were in favor of protectionists, in mercantilists one of the famous economist was Thomas Munn’s, today’s economist also have some reservation about free trade like Alan S. Blinder, on the other hand Adam Smith and Ricardo gave the idea of free trade. Classical economists also support and think that free trade can be helpful in getting peace in world like Keynes and Cordell Hull.

Trade liberalization in South Asian Countries

For Pakistan the sixth Five-year plan (1983-88) marks the beginning of the process of deregulation and liberalization, which was carried out with much greater forces after 1988 when Pakistan economy became completely subservient to IMF and World Bank directives.[2] For the first time in history Pakistan changed its trade policy. That new policy enhances the efficiency of the industrial sector. This policy was concentrates on exports-led industrialization for the first time. In this period, Pakistan saw a remarkable growth in its economic sector. It was calculated that the “private sector’s” share in total investment increased from 38 percent in FY83 to 42 percent in FY 88 and in manufacturing sector its share in investment rose from 51 percent to 83 percent.[3] This shows how much Pakistan gain from trade liberalization.

India has adopted several waves of far-reaching trade reforms since 1991. The reforms have included sharp reductions in the number of goods subject to licensing and other non-tariff barriers, reductions in export restrictions, and tariff cuts across all industries. Trade liberalization has resulted in higher levels of competition within the Indian economy, as measured by reductions in price markups over marginal cost (Krishna and Mitra 1998). This change raises an interesting question as to whether greater competition through trade liberalization has affected the wages of male and female workers differently. With less government protection and with increased exposure to competition from abroad, employment and pay patterns in manufacturing changed markedly following the liberalization. Yet manufacturing industries experienced quite a bit of variation in the timing and extent of tariff cuts during and after the 1991 reforms. These differential rates in trade liberalization across industries provide an excellent opportunity for examining the impact of increasing exposure to international trade on gender wage differentials.[4]

The pace of Bangladesh's trade liberalization is comparable to that of many Countries that are experiencing benefits from their reforms. While faster than some of its South Asian neighbors, Bangladesh has not moved farther than Sri Lanka. Indeed, the remaining anti-export bias of trade policy is considerable. Some trade-related quantitative restrictions still impede import flows. After a start in the mid-I 980s, Bangladesh's trade liberalization effort picked up its pace in the early 1990s as an important component of the country's structural reform program. Since the mid 1990s, however, movement toward a lower and uniform tariff rate has slowed due to concerns for budgetary revenues, the balance of payments, and, in particular, possible adverse effects of trade liberalization on import-competing industries.

Although the direct causal connection of trade liberalization to economic performance in general and to...
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