Free trade and domestic policy

It is a war of narratives and ideas. In its criticism of the new policy of national duties (2025-30), the Council of Research and Counseling Research (PRAC), which was founded by the Business Community and the Federation of Pakistani Trade and Industry (FPCCI), expressed concern that the policy of new invoices could have been deprived of it.

In a statement, PRC said that politics is based on an ideology of free trade that is no longer compatible with the changing economic realities of the world.

The business community is seeking to restore pricing and subsidies. It is of the view that if left unchanged, the new policy could undermine recent economic stability, further weaken industries and limit long -term growth.

It is not surprising that a think tank created by the FPCCI and the business community has opposed a bold shift in commercial policy. It is for the first time that the government has given a clear signal to move away from the import substitution regime, which is mainly responsible for the bad industrial performance and prospects for Pakistan.

The strong opposition of the PRAC to the new invoice is solely due to the losses that existing businesses will board, having increased so far depending on tariff -based protections.

Let’s choose the automatic sector, for example – and perhaps the most challenged sector when it comes to duty policy. I divide the automatic sector into two product categories: the two -wheeler or the motorcycle and the four -wheeled or car. The underlying thinking behind this classification is the role of pricing policy.

About 25 years ago, the government took a clear exit from the protective regime in the case of motorcycles. It opened the industry and liberated the licensing regime. As a result, nearly 30 new companies have come to the market, causing a large -scale multiplication in industrial production, bringing economies of scale and maintaining competitive price control. The result: For almost 20 years, by 2018, the price of the top brand of bicycle remained the same.

Let this sink. In these 20 years, Pakistani Rupia has been significantly underestimated and all the utility costs, input prices and the cost of materials increased significantly. However, the top brand of bicycles was forced to sell its product at the same price of the RS70,000.

In the meantime, competitive products were available at half price. The overall production doubled, thus helping top businesses to upgrade their production. Annual motorcycle production increased from less than 100,000 points to more than 1.5 million.

Now, let’s look at the case of the four wheels, which has enjoyed strong invoices -based protection over the last five decades, though this sector is relatively open. Even the different well -intentioned, the policy of new duties has given a kind of resignation to this area for another year until the end of current car policy.

As consumers, we continue to buy the most expensive, local assembled cars, while the government continues to collect heavy taxes on the product. Both corporate and state benefit from the cost of an average citizen.

Car ownership, based on households, remains quite low at just 7%. The property of the motorcycle, on the other hand, is over 54%. Annual cars production increased by 3.7 times in 25 years, while motorcycles increased by 15 times during the same period.

Conclusion: It is not a free trade, which undermined our economic growth, but its absence.

A disclaimer is okay. The policy of free trade, in the presence of taxes against growth and ongoing regulations, cannot achieve much in itself. However, it has the power to shift business dynamics by encouraging investment, competition and innovation.

Free trade can also create prolonged pressure on domestic policy to correct where needed – in taxes, regulations and energy pricing. Therefore, while we need a strong domestic policy, it should not negotiate with more protectionism.

The PRAC is right to say that after Trump’s invoices, people may have entered a new tariff war, implying that they must wash our hands from the beginning of free trade. However, first, we must understand that the economy of the world is no longer driven exclusively by the US.

In a recent statement, President Trump expressed his desire to learn from other advanced economies. He’s right. About 86% of imports in the world are non-US, and 93% of exports in the world are not US.

I prefer the wider impulse and direction of the new pricing policy. However, it remains to be careful and a moderate gradual and therefore concerns the origin of the PRAC may not be carried out in any way.

Another promising aspect would be the active reason that the new policy has created. The government must ensure such documents in public control long before approval, an action that is largely neglected.

The author is the CEO of the Prime Institute of Policy (Prime), an independent economic policy Think Tank