Abstract/Description

Textiles serve as the export engine of Pakistan’s economy, constituting 60 percent of its total exports. Despite this prominence, Pakistan's global share in textile exports has consistently declined. Considering this, this study explores the potential impact of Free Trade Agreements (FTAs) on fostering textile exports. The study applied a structural gravity model with the Poisson pseudo-maximum likelihood (PPML) estimator to analyze annual exports for the period 2002–2021. Findings exhibit a positive and statistically significant effect of FTAs on textile exports, with varied impacts compared to major competitors. Moreover, we categorized textile products at the HS 4-digit level based on their value addition. Pakistan's FTAs facilitate the export of low and medium-value-added textile products to Malaysia and South Asian countries, while exports of high-value-added products benefit from FTAs with China and Sri Lanka. The Pakistan-China FTA stands out as highly effective. Regarding the European Union's Generalized System of Preferences (EU-GSP +) designed to leverage trade benefits, findings reveal a significant impact on textile exports, though this impact is limited across various value-addition categories. Overall, the lack of policy support for high-valueadded exports contributes to the sector being mired in a low-value-added export trap.

Keywords

FTA’s, Exports, Textile, Structural Gravity, PPML

JEL Codes

F10; F13; F14; F15

Location

S2 room, Adamjee building

Session Theme

Digital Transformation: Insights from Complex Economic Data

Session Type

Parallel Technical Session

Session Chair

Hadia Majid, Lahore University of Management Sciences

Session Discussant

Wali Ullah, Institute of Business Administration ; Zehra Aftab, Prince Muhammad University

Start Date

9-12-2024 2:30 PM

End Date

9-12-2024 4:30 PM

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Dec 9th, 2:30 PM Dec 9th, 4:30 PM

Assessing Pakistan’s Textile Exports under Trade Agreements

S2 room, Adamjee building

Textiles serve as the export engine of Pakistan’s economy, constituting 60 percent of its total exports. Despite this prominence, Pakistan's global share in textile exports has consistently declined. Considering this, this study explores the potential impact of Free Trade Agreements (FTAs) on fostering textile exports. The study applied a structural gravity model with the Poisson pseudo-maximum likelihood (PPML) estimator to analyze annual exports for the period 2002–2021. Findings exhibit a positive and statistically significant effect of FTAs on textile exports, with varied impacts compared to major competitors. Moreover, we categorized textile products at the HS 4-digit level based on their value addition. Pakistan's FTAs facilitate the export of low and medium-value-added textile products to Malaysia and South Asian countries, while exports of high-value-added products benefit from FTAs with China and Sri Lanka. The Pakistan-China FTA stands out as highly effective. Regarding the European Union's Generalized System of Preferences (EU-GSP +) designed to leverage trade benefits, findings reveal a significant impact on textile exports, though this impact is limited across various value-addition categories. Overall, the lack of policy support for high-valueadded exports contributes to the sector being mired in a low-value-added export trap.