Title

Exports creation and diversion: An analysis of Free Trade Agreements of Pakistan after adjusting for exports misinvoicing

Abstract/Description

This study examines whether free trade agreements (FTAs) of Pakistan have created new exports after adjusting for misinvoicing. We collect trade data for 9 partner countries of Pakistan in FTA and 15 partner countries in most favored nations (MFN). We examine the magnitude of misinvoicing in 91 exports oriented industries. The study finds annual exports overinvoicing of USD283 million and exports underinvoicing of USD209 million from Pakistan. We also find that the magnitude of both misinvoicing is greater with FTA partners as compared to MFN partners. After adjusting for misinvoicing we find that 45 to 51 industries are exports creating, while about 10 to 12 industries are exports diverting. Moreover, 22-33 industries show decline in exports with the FTA partners when adjusted for misinvoicing. The findings show that on average FTAs are beneficial in creating new exports for Pakistan. However, the worth of new exports is very low relative to total exports. The total amount of exports creation ranges between USD351-390 million per annum which is only 1.5 percent of Pakistan’s total annual exports. The results of exports creation and diversion are consistent as we found them to be similar in 61 out of 91 industries after adjusting for misinvoicing.

JEL Codes

F1, F14, F68, K42, H26

Location

Lecture Room 1, 12th Floor, Aman Tower

Session Theme

Firms, Trade and Globalization - Session IA

Session Type

Parallel Technical Session

Session Chair

Dr. Asad Sayeed, Economist and Researcher, Collective for Social Science Research

Session Discussant

Dr. Saqib Sharif, Associate Professor, Institute of Business Administration, Karachi

Start Date

2-4-2021 2:30 PM

End Date

2-4-2021 4:00 PM

Comments

  • Tehseen Ahmed Qureshi is a PhD Scholar at School of Economics, Quaid-i-Azam University
  • Anwar Shah is an Associate Professor of Economics at School of Economics, Quaid-i-Azam University

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Apr 2nd, 2:30 PM Apr 2nd, 4:00 PM

Exports creation and diversion: An analysis of Free Trade Agreements of Pakistan after adjusting for exports misinvoicing

Lecture Room 1, 12th Floor, Aman Tower

This study examines whether free trade agreements (FTAs) of Pakistan have created new exports after adjusting for misinvoicing. We collect trade data for 9 partner countries of Pakistan in FTA and 15 partner countries in most favored nations (MFN). We examine the magnitude of misinvoicing in 91 exports oriented industries. The study finds annual exports overinvoicing of USD283 million and exports underinvoicing of USD209 million from Pakistan. We also find that the magnitude of both misinvoicing is greater with FTA partners as compared to MFN partners. After adjusting for misinvoicing we find that 45 to 51 industries are exports creating, while about 10 to 12 industries are exports diverting. Moreover, 22-33 industries show decline in exports with the FTA partners when adjusted for misinvoicing. The findings show that on average FTAs are beneficial in creating new exports for Pakistan. However, the worth of new exports is very low relative to total exports. The total amount of exports creation ranges between USD351-390 million per annum which is only 1.5 percent of Pakistan’s total annual exports. The results of exports creation and diversion are consistent as we found them to be similar in 61 out of 91 industries after adjusting for misinvoicing.