The tariff data in Pakistan for FY25-FY26 highlights a clash between reformist intent and protectionist reflex, indicating a lack of policy discipline, as per a report. The report from The News International uncovers a significant narrative beyond the typical annual customs duties adjustment. It reveals a collision of economic philosophies in real-time.
For years, Pakistan’s manufacturing sector has struggled due to high input costs rather than a lack of talent or ambition. The report notes that local production costs were inflated by high taxes on raw materials, intermediate goods, and industrial components. This tax structure discouraged value addition and favored importing finished products over local manufacturing.
While the FY25-FY26 data shows a positive shift from this trend, the report warns that the tariff structure’s peak is becoming more rigid and distorting in high-value sectors like automobiles, ceramics, home appliances, and rubber products. Protection on auto Completely Built Units (CBUs) has increased significantly, reinforcing a protectionist regime in the region.
The report raises concerns about the export implications of such protectionist policies. It points out that shielding domestic markets can discourage firms from exporting, as they find it more profitable to operate under tariff protection domestically. This approach has hindered the growth of industries that were meant to be nurtured as ‘infant industries’ but have remained uncompetitive on a global scale.
Pakistan’s overreliance on tariff policy as a substitute for industrial policy is seen as a fundamental flaw. Unlike successful countries that used protectionism strategically, Pakistan’s protectionist approach lacks discipline and perpetuates industries based on political influence rather than competitiveness.
