Pakistan trade policy 2025

End to Trade Diplomacy? Pakistan’s Shift from Free Trade to Geo-Economics

Introduction

The era of unrestrained globalization is fading. Nations that once championed free trade are now recalibrating their policies to protect national interests. Mohammad Younus Dagha highlights how this global shift from neoliberalism to geo-economics has serious implications for Pakistan’s trade and industrial future.

(Internal link suggestion: Link “geo-economics” to an article on Pakistan’s economic diplomacy or CPEC-2 analysis.)

Background & Global Shift

The world economy is witnessing a reversal of the free-trade era. Countries are increasingly resorting to tariffs, trade blocs, and protectionist policies. From the US–China rivalry to the growing strength of regional alliances such as ASEAN and the EU, trade is no longer only about economics—it is a strategic tool of diplomacy.

(Internal link suggestion: Link “US–China rivalry” to a piece on global trade wars.)

Pakistan’s Trade Landscape

Pakistan has fallen behind its regional competitors in forging Free Trade Agreements (FTAs) and Preferential Trade Agreements (PTAs). Where countries like India, Bangladesh, and Vietnam have leveraged trade diplomacy to expand markets, Pakistan’s reliance on unilateral tariff reductions has widened trade deficits without significantly boosting exports.

(Internal link suggestion: Link “trade deficits” to an article on Pakistan’s balance of payments crisis.)

Export & Industrial Performance

  • In the past three decades, Pakistan’s exports grew only 3.7 times, while India and Bangladesh recorded double-digit growth multiples.

  • Imports surged eightfold, pushing trade deficits to historic highs.

  • Industrial growth in Pakistan lagged far behind Vietnam, Bangladesh, and India, exposing structural weaknesses in policy.

(Internal link suggestion: Link “industrial growth” to a blog on Pakistan’s manufacturing sector challenges.)

The New National Tariff Policy (2025–2030)

The latest tariff reforms aim to simplify slabs to 0%, 5%, 10%, and 15%, reducing the overall average tariff to below 6% by 2030. While this looks business-friendly, it risks undermining domestic industry by abandoning the earlier balanced approach that taxed luxury imports while supporting industrial inputs.

(Internal link suggestion: Link “tariff reforms” to a policy analysis on IMF reforms in Pakistan.)

Immediate Risks

Recent trends confirm these concerns. In the first two months of the new policy’s implementation, the trade deficit rose by nearly 30%, while exports declined by over 12%. These figures raise alarm about the sustainability of external accounts and industrial growth.

(Internal link suggestion: Link “exports declined” to a report on Pakistan’s export crisis.)

Strategic Pivot Needed

Pakistan’s large consumer base of over 250 million people gives it bargaining power. Instead of offering unilateral concessions, the country should:

  • Pursue reciprocal trade agreements that open foreign markets for its goods.

  • Use tariffs as negotiation tools rather than dismantling them entirely.

  • Ensure a stable policy environment to attract long-term investment.

  • Provide protection for vulnerable industries until they achieve competitiveness.

(Internal link suggestion: Link “reciprocal trade agreements” to a piece on Pakistan’s trade with GCC or ASEAN.)

Conclusion

The time for blind liberalization is over. Pakistan must embrace strategic trade diplomacy—rooted in reciprocity, industrial protection, and policy stability. Only then can it safeguard its economic sovereignty and secure a stronger foothold in an increasingly protectionist world.

(Internal link suggestion: Link “economic sovereignty” to a blog on Pakistan’s economic independence and IMF reliance.)

Vocabulary Table

Word / Phrase Meaning Usage in Context
Geo-economics Economic policymaking driven by strategic national interest “A new era of geo-economics reshapes global trade.”
Tariff liberalization Reducing tariffs to open up trade “Tariff liberalization in the 1990s didn’t expand exports as expected.”
Unilateral opening Opening markets without reciprocal benefits “If we open our market unilaterally, partners may avoid trade negotiations.”
Trade diplomacy Negotiating trade terms through policy tools “Smart trade deals require proactive trade diplomacy.”
De-industrialization Decline in manufacturing capacity “Our industries faced their worst downward spiral into early de-industrialization.”
Current account surplus Export-import balance net inflow “The current account surplus achieved only last year is now at risk.”
Preferential trade agreement Agreement with favorable terms for signatories “Pakistan has very few preferential trade agreements compared to competitors.”
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