This article is a collective work of Mr. Shah Masood, Miss Nabila Khurshid, Mr. Maqsood Haider, Miss Jamila Khurshid, and Mr. Arif Masih Khokhar. It was published under Asia Pacific Management Review and was available online on April 25, 2022. The article dives into investigating the trade potential of Pakistan with South Asian countries using an augmented Gravity Model approach.
Regional trade, time, and time have proven themselves a leading cause of economic growth. The biggest example is the European Union. 27 countries have managed to boost their standard of living by promoting neighborly trade. The article suggests that South Asia doing the same. Unfortunately, it shows a lot of potential is going to vain due to ideological and political differences. In the era of liberalized trade, where ideological rifts are put aside to side for ensuring mutual benefits, this problem is still prevalent.
The authors further shed light on how South Asia is the second economically largest region in Asia. Contrarily, it is also the second most poverty-affected region. This is not only ironic but also suggestive of something unproductive. It has also been mentioned that initiatives for RTAs had been made but were not implemented staunchly.
However, this article focuses on the untapped potential of Pakistan. All while keeping in mind Newton’s theory of gravitation. Yes, a law of physics is implemented in the world of trade. As much as bizarre it may sound at first, all it takes is a little familiarity for it to be seen as practical.
The authors before defining the trade relationship of Pakistan via the lens of the gravitational model focus on the question that is “What exactly is a gravitational model?” It has been skillfully explained that a gravitational model is a tool used for speculating bilateral trade flow. It consists of two main elements i.e. economic sizes and the distance between the two states.
While moving further the article unfolds Pakistan’s rate of trade with its neighborhood countries. Pakistan’s biggest trade partner is Afghanistan. Bangladesh is second then comes India and Sri Lanka respectively. Bhutan, Nepal, and Maldives have not been the major trade areas for Pakistan which is a loss. If it weren’t for the bumpy relations with Afghanistan, this trade could be further amplified. Talks same is the case for India, The India-Pakistan trade is often overlooked because of its dark history and feuds. But when it comes to the rest of the countries, the article recommends how Pakistan can pay more attention to developing trade relations. According to the gravitational model approach, the less the distance is, the less will be friction in trade flow. Authors emphasize how It can enable a strong-knit community of South Asian countries, to intertwine with each other for a seamless flow of trade. This can be a potential for the region to gain autonomy, strengthen its regional power, and improve its state’s GDP which is proven throughout the study.
Statements were made in the article of how Pakistan can be a benefactor of this and is itself a geostrategic, rich in resources, agrarian country. It has also been observed in the article that tariff imposition can immensely affect Pakistan’s GDP. A drop of 1 percent in tariff imposition can diminish 0.3 percent in Pakistan’s trade where, whereas an increase of 1 percent means an increase of 0.5 percent in Pakistan’s trade. As simple as it may be, it is quite an effective strategy.
Lastly, the article provides recommendations. Pakistan should explore the horizons of improving trade within the South Asian region and also revise tariff rates ensuring their national interest, it is suggested. India and Pakistan should put aside their political issues for the mutual benefit of their people while indulging in honest trade. Pakistan should improve its trade relations with its neighbourhood countries and this can be the groundwork for a new potential to thrive in!
The writer is a student of “IR” at “IIUI” and a member of PYDIR.