UNIT 10

What is Trade?
• No country in the world is self-sufficient in all the commodities needed by its people.
• To provide goods and services an exchange needs to be done.
• This exchange of goods and services between different areas is called trade.

How do we benefit from trade?

• Specialization of production
• comparative advantage
• Promotes industrialization
• Employment opportunities
• May lead to rise GNP
• Production of value added goods
• Foreign exchange earned through trade
• Transfer of information technology (the
flow of capital and IT to developing
countries from the developed countries
increases the rate of economic
development. Pakistan could import IT
because of foreign trade)

EXPORTS and IMPORTS:

• At the same time we also buy millions of

• Every country needs to trade to survive.
• Each year we sell millions of rupees
worth of goods and services to other
countries, these are Exports.
• An export is represented by a flow of
foreign exchange coming into the
country.
rupees worth of goods and services
from other countries, these goods are
Imports.
• An import is represented by the flow of
foreign exchange leaving Pakistan.

Imports of Pakistan:

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 • Wheat, edible oil, sugar, pulses etc.
• Machinery e.g.
textile, electrical, construction, mining and
agricultural.
• Petroleum and petroleum products
• Textile e.g. synthetic fibers
• Fertilizers and other chemicals
• Metals e.g. iron and steel
• Pharmaceutical products
• Plastic materials
• Vehicles and spare parts
• Tea

Major Exports:
• Cotton products 58.4 %
• Leather 6.1 %
• Synthetic textile 1.2 %
• Rice 6.9 %
• Sports goods 1.9 %
• Primary commodities (fruits, vegetables,
fish)
• Others 25.5 %

Imports: China (Electrical appliances, stationery items, machinery and others/Saudi Arabia (Mineral oil)/UAE (Mineral
oil)/Kuwait (Mineral Oil)/USA (Machinery, vegetable oil, wheat)/Japan (Machinery, Electrical appliances)/EU(electrical
appliances, Machinery)
Exports: USA (carpets, rugs, surgical and sports goods)/UAE (spices, rice, readymade garments)/China/UK (raw
cotton)/EU (cotton cloths)

Study Fig. Which shows the value of exports and imports

in Pakistan in 2011.
Study Fig. Which shows imports of goods to Pakistan in 2007.
State the percentage of:
A. Machinery B. Electrical goods

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 Explain why it is difficult for Pakistan to sell more of its goods to other countries. [4]
Challenging to compete with foreign / larger companies / producers (accept an example,e.g. Egypt – textiles)/Quality of
items (lack of access to / high cost of raw materials / machinery)/Child labor causes barriers to trade (e.g. EU)/Limited
management expertise in the export industry/Other countries have trade barriers/tariffs/quotas/restrictions (to protect
their own industries/markets)/Relations with some other countries restricts trade/Pakistan government may have trade
barriers with other countries (e.g. China – on cheap imported goods)

The Balance of Payments Position:

• Balance of Payments =value of exports – value of imports

• Pakistan has always had a negative balance of payment because

• The value of its imports exceeds that of its exports.

• Imports of capital goods and consumer goods

• Export of small variety

• Import of food items and luxury items

• Most of our eexports dependent on the weather

• Trade barriers

• Pakistan doesn’t belong to any major world organizations

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 SAARC: The South Asian Association for Regional Cooperation (SAARC) is an economic and
political organization of eight countries in South Asia. It was established in 1985 when the Heads
of State of Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka formally adopted
the charter.

Measures to correct the negative balance of payments:

• By increasing exports
• By restricting imports
• By curtailing imports related to the tertiary sector
• By exporting value added products
• Reduction in taxes
• Strict quality control
• By developing EPZs
Export Processing Zones (EPZs):

• Export processing zones contain industrial units which manufacture the products with export
potential.
• EPZ authority, Pakistan was established in 1980 with the mandate to plan, develop and operate
Export Processing Zones in Pakistan.

1) Karachi Export Processing Zone (KEPZ)

2) Gwadar Export Processing Zone
3) Sialkot Export Processing Zone
4) Gujranwala Export Processing Zone
Explain the importance of EPZ:
Infrastructure required for the EPZs: Good quality goods/export quality / to
• EPZs should be established near the seaport International standards/Can increase
to facilitate the export and import of goods economy/income/exports / foreign
and the import of the required machinery. exchange/Better
• Consistent Government policies help to infrastructure/power/water supply/road etc.
bring stability in the investment climate of a (max. 2)/Good working conditions (max 2)
country thus attracting more local and Modern buildings/Incentives e.g. tax breaks,
foreign investors. cheap loans/Attracts
• Adequate air travel facilities should be investors/entrepreneurs
available. Aids growth of small-scale / cottage
• Adequate transport facilities for the industries
marketing of finished goods. Employment/jobs/Government helps with
• Efficient transport links to raw material marketing events/trade fairs
sources.

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 Study Photograph B (Insert), showing Landhi Export Processing Zone, Karachi.
What features show that this is a modern, developed industrial estate?

Strategic Geographical Situation of Gwadar:

• Gwadar’s location between Karachi and UAE on the one hand, and on the door step of the central
Asian States (CAS) on the other, could be suitable for EPZs due to a number of factors.
(i) Foreign investment along with Hi Tech for EPZs could be attracted to Gwader and Ormara
being port cities with access and exposure to the CAS.
(ii) The port of Gwadar can serve as “regional trade hub” with the recent geo political
developments in the region such as rehabilitation and development of Afghanistan and the
CAS.
(iii) The deep water port and export processing zone can be developed simultaneously.

Functions of the Export Promotion Bureau:

• EPB was formed by the government of
Pakistan to organize and regulate export
activities. its functions include:
(i) Creating awareness among the
manufacturing service sector about
potential exports.
(ii) Exploring and identifying market
opportunities abroad.
(iii) Assisting Pakistan’s entrepreneurs
to secure entries in the
international market.

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 Trade Development Authority of Pakistan:

• TDAP has formally replaced the Export Promotion Bureau which has been responsible for the
export promotion for Pakistan for the last 43 years.
• TDAP will be under the administrative control of the ministry of commerce in order to ensure that
the TDAP’s policies are in line with the overall policies of the federal government.

World Trade Organization:

• WTO is an international institution to allow free trade between its member countries by reducing
or abolishing certain restrictions imposed by the governments of these countries on their exports
and imports.
• It came into being in 1995.
• It is the successor to the General Agreement on Tariffs and Trade (GATT) established in the wake
of the 2nd world war in January 1948 to boost trade liberalization.
• After joining the WTO, Pakistan’s accessibility into international markets would be on the basis of
its competitiveness.

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 Study Fig. 7, which gives information for the Gross Domestic Product (GDP) of Pakistan in 1992 and 2012.
What is meant by the term Gross Domestic Product (GDP)?
What percentage of GDP came from services in 2012?
What might be included in the category ‘other industry’?

A one export that has increased in percentage,

B two exports that have decreased in percentage

Why is Quetta an important trading centre? [3]

Focus of roads/well connected to rest of country

Main road through pass/RCD highway
Nomadic tribes/Near Afghan border/Afghanistan
Only large settlement in area
Railway/Airport/Dry ports
Capital of Baluchistan
EUROPEN UNION:
Republic of Pakistan has grown in recent years in
the fields of politics and development. However,
although the EU is regarded as a strong economic
player it is still seen as a weak political power.
The EU intends to change that view by using its
position as a development and aid donor as its
main strategy to foster democracy and
strengthen Pakistan’s institution-building. The
main areas of cooperation are development,
trade, humanitarian assistance and sectoral co-
operation on energy, environment, health,
transport, migration and climate change. The
challenge for both partners is to get to know each
The EU is Pakistan’s leading trading partner.The other and build up mutual trust as the intention
relationship between the EU and the Islamic is to develop a long-term relationship

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Study the World
Map, Fig. 6 (Insert 2)
Choose two of the countries A – E. Using the lines on the map
Name the country
[A] USA/America
[B] UK (accept England or British Isles)
[C] Germany (not EU)
[D] Saudi Arabia
[E] Japan

State a product that the country imports from Pakistan

[A] Carpets, rugs surgical, sports goods
[B] (Raw) cotton, goods to A
[C] Cotton cloth, goods to A
[D] Spices, rice, ready-made garments/cotton/fish
[E] Fish and fish products/cotton (2 + 2)
How can Pakistan increase foreign exchange earned by trading with a country or trading bloc such as SAARC or the EU?
Value-added/processed goods Tourism
Good quality Invisible earnings
Competitive prices
Reliable supply Why does Pakistan need to increase foreign exchange?
Stable government Negative balance of payments/trade
Good (tele)communications Reduce foreign debt
Political influence/agreements Investment in agriculture
Better port facilities Industrialisation
Named infrastructure improvements
State another way other than trade, in which Pakistan can Better housing/ resettle squatters
earn foreign exchange. Cost of foreign expertise
Remittances (from relatives abroad)

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