ABSTRACT
The Unit focus on the reasons to carry out trade and
the constraints that might restrict trade
BLAST FROM THE PAST
Year Series
2016 May June
2017
TRADE
Trade around the world
2022
Oct Nov
2021
2018
2016
2016
2015
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Unit 10 Trade
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Unit 10 Trade
Trade: It is the sale and purchase of goods and services
International/Foreign trade: is trade between two countries.
Domestic trade: is trade within the country.
WHY TRADE IS NECESSARY?
- It stimulates economic activity
- Economies of scale are achieved
- Employment for traders and those who produce export products
- Allow specialization of goods
- Domestic resources are utilized
- Exports help to earn Foreign Exchange
- Flow of IT
- Contribute to GDP therefore to national income
- Value added products
- Foreign Exchange earned and can be spent on import
GDP [Gross Domestic Product] GNP [Gross National Product]
GDP is domestic production from within a GNP is the production by nationals both within
country regardless of who produced it/from and outside Pakistan/ measures the output by
nationals or foreign companies/the value of Pakistan nationals/companies wherever they
everything that people in a country produce. are in the world
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Unit 10 Trade
TYPE OF IMPORTS AND TRENDS OF IMPORTS
Imports Goods or services are purchased
Type of Imports - Capital Goods
- Raw Materials
- Consumer Goods
Examples - mineral fuels including
- coal/oil/petroleum/oil products;
- Machinery/electronics/electrical equipment;
- Iron/steel;
- Chemicals/chemical products;
- Vehicles/cars;
- Plastics/plastic articles;
- Animal/vegetable
- fats/oils/waxes;
- Oil seeds;
- Cotton;
- Wheat:
Trend of Imports - Imports of primary goods/raw materials have
decreased
- Imports of food/food products have decreased
- Imports of consumer/value added goods have
decreased
- Imports of raw materials for consumer/value added
goods/for manufacturing have increased
- Capital goods have increased
- Imports of fuel oils/energy have
fluctuated/increased
- Imports of raw materials (recently/2022) been
paused/restricted
- Imports overall were paused/decreased during
COVID-19
Impact of Changing Import - Boost to industrialization as more industries are
Trends on BOT & Economy of setup leading to more employment opportunities
Pakistan - Capital goods are more value as compare to value
of export items leading to negative BOT which
burdens the economy and loans have to be taken
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Unit 10 Trade
TYPE OF EXPORTS AND TRENDS OF EXPORTS
Exports Goods or services are sold
Type of Exports - Primary goods
-
Secondary goods
- Consumer Goods
Examples - Miscellaneous textiles/worn clothing;
- Cotton (yarn) (medium staple);
- Knit or crochet clothing/accessories;
- Clothing/accessories (not knit or crochet);
- Cereals/rice;
- Leather/animal gut articles;
- Copper;
- Sugar/sugar confectionery;
- Mineral fuels including oil;
- Beverages/spirits/vinegar;
- Salt/Sulphur/stone/cement;
-
Fruit, nuts;
- Medical/surgical/optical/technical apparatus;
- Sports goods;
- Carpets and rugs;
Trend of Exports - Exports of low value/primary products have
decreased;
-
Exports of high value/industrial products
have increased
- Exports of value-added goods have
increased
Impact of Changing Export - As manufactured items are more value added
Trends on BOT & Economy of so of greater price hence high profit leading
Pakistan to more Foreign Exchange earned so
improves BOT
-
Boosting Industrialization creating more
employment leading to increase per Capita
income
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Unit 10 Trade
Balance of Trade Balance of Payment
Difference between value of imports Difference between value of imports
and exports of goods only and exports of good as well as services
Trade Balance = Export – Imports
Trade Deficit: Trade deficit is a negative balance of trade where the value of imports
exceeds the value of the exports.
REASONS WHY PAKISTAN’S BOT/BOP WAS MOSTLY NEGATIVE
[TRADE DEFICIT]
- Value of imports is greater than exports (import of higher value goods compared with
goods for export which are lower value);
- Export a small variety of goods (e.g. cotton, rice, sports goods, leather goods, carpets)
- Most of the , (e.g. bad storms, heavy rain etc. leading to failed harvests);
- Restrictions on exports due to issues such as child labour, environmental issues
- Tough world market competitors / competition (e.g. Pakistan does not belong to major
trade organisations, lack of standardisation / quality)
- Political Instability in the country, government policies keep on changing that deters
foreign investment
HOW TO IMPROVE BOT/BOP
Increasing Export Reducing Import
- Value added products - Improved quality of
education/training for skilled
labour to improve quality
- Ensuring reliable supply to win the - Import of luxury items reduced
confidence of trading partners
- Increase the variety of export - Pakistan’s own resources need to
products be explored and exploited
- Reducing taxes on imports - Sense of Patriotism so people only
buy local made products
- Boost industrialisation by - Putting Tariffs on imports to
developing export agencies e.g. discourage people
Export Promotion Bureau
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Unit 10 Trade
EXCHNAGE RATE & FOREIGN EXCHANGE
Exchange Rate An exchange rate refers to the price of one
currency in terms of other currency e.g.
one US $ can buy 284 PKR.
Exchange Rate Helps to Determine - Cost of imports and price of exports
- Cost and return on overseas
investment
Foreign Exchange International currency like US Dollar
which is used in international market for
trade of goods and services
Source of Foreign Exchange - Exports
- Remittances: When migrants send
home part of their earnings in the
form of either cash or goods to
support their families.
Why Foreign Exchange is Important? Economy stabilizes
Imports can be purchased e.g.
- Capital goods for industry
- Oil and oil products
- Fertilizers for agriculture
Loans can be returned
BOT will be improved or less
trade deficit
TRADE BARRIERS
Trade barriers Trade barriers exist when government
imposes a set of restrictions that make it
difficult for a country to trade its goods and
services efficiently and easily
Types of Trade Barriers 1.Tariffs (Taxes on imports)
2. Embargoes (a ban on certain imported
products)
3. Quotas (Limiting the physical quantity
of goods to be imported)
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Unit 10 Trade
TRADING BLOCS
Trading Blocs Trading blocs are usually groups of
countries in specific regions that manage
and promote trade activities.
Pakistan is the member
• SAARC (South Asian Association
for Regional Cooperation)
• ASEAN (Association of South East
Asian Nations)
Types of Trade Barriers 1. Tariffs (Taxes on imports)
2. Embargoes (a ban on certain imported
products)
3. Quotas (Limiting the physical quantity
of goods to be imported)
PAKISTAN AND EU [EUROPEAN UNION]
EUROPEAN UNION - A trading bloc of 27 member states, Located in Europe.
Functions as a single market
- Allows the free circulation of goods, capital, people, and
services within the EU.
- No customs duties or import quotas for goods and services
within the EU
- Restrictions do exist for trade outside the EU
Advantages - Increased trade with the EU could attract local and foreign
investors, leading to greater investment in Pakistan's industries.
- Trade-related activities, such as manufacturing and export services,
could create more employment opportunities for Pakistanis.
- EU countries have fewer trade barriers compared to other markets,
making it easier for Pakistani products to reach EU consumers.
- The EU is a politically and economically stable region, reducing the
risk of sudden changes in market trends that might affect Pakistan's
exports.
Disadvantages - Products from Pakistan's cottage and small-scale industries may
not meet EU standards, hindering their access to the EU market.
- Pakistan's trade agreements with other countries, like China, could
impact its ability to compete with EU imports in the local market.
- Pakistan's exports are heavily dependent on agriculture, which is
vulnerable to natural factors, making it difficult to guarantee a
steady supply of goods for the EU market.
- Pakistan's exports may face restrictions due to environmental
concerns and child labor issues, which could further limit its access
to the EU market.
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Unit 10 Trade
TRADING PARTNERS OF PAKISTAN
main trading Goods imported Goods exported
partner
UK iron and steel clothing/textiles
machinery cereals/fruits/nuts cotton
electrical appliances surgical goods
vehicles
Germany/ named machinery pharmaceuticals clothing/textiles cotton
EU countries electrical appliances leather articles
chemicals surgical goods
USA cotton clothing/textiles cotton
iron and steel machinery leather articles
pharmaceuticals mineral carpets/rugs surgical
oil/fuel vegetable oil goods sports goods
wheat
named Middle Eastern mineral oil/fuel electrical meat cereals
countries equipment plastics clothing/textiles spices/rice
machinery
China electrical equipment cotton copper
machinery pharmaceuticals cereals fish
mineral oil/fuel stationary cotton yarn
Afghanistan cotton fruits/nuts/vegetable cereals/sugar/flour/rice/
mineral oils/fuel vegetables
salt edible oil salt
iron and steel plastics pharmaceuticals
Japan electrical appliances cotton clothing/textiles
vehicles fish and fish products
machinery
Bangladesh tea cotton/jute cement
textiles
Indonesia/ tea edible oil textiles
Malaysia/Sri Lanka clothing
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TRADING PARTNERS OF PAKISTAN-LOCATION ON MAP
Unit 10
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Trade
Unit 10 Trade
FACTORS SUPPORTING TRADE & HINDERING TRADE
Factors Support Trade Hinder Trade
Trading Blocs - members have a free trade - Pakistan is a member of
agreement/there are low or zero trade ECO/ASEAN; but have trade
restrictions; which encourages trade barriers; which hinders trade
between member states e.g. Pakistan is a between non-member states
member of SAARC/so more goods can be which affects Pakistan if it
exported to does not belong to a
member countries by Pakistan; particular trading bloc;
- since 2014 Pakistan has had preferential
access for its exports to EU markets; with
low or zero tariffs on most goods
increasing trade;
-
Exchange - Determine the cost of imports and the - currency depreciation
Rate value of exports; therefore the means that imports are more
increase or decrease of the PK Rupee is expensive/exports have
significant to trade; determine the lower value; this can reduce
amount of overseas investment; trade as Pakistan may not be
companies/government/ people more able to afford to import as
likely to invest in Pakistan if the
many goods/will earn less
exchange rate is favourable;
from exports;
- currency appreciation means that
imports are cheaper/exports have
higher value; this can increase trade as
Pakistan can afford to import
more goods/will earn more from
exports//however Pakistan’s exports
may decrease as countries may shop
around for cheaper goods elsewhere
Export - attracts foreign investment/boosts
Processing industrialisation/offers incentives, e.g.
Zone tax breaks for import
Export - has an overview of the
Promotion planning and development of different
Bureau sectors/marketing of Pakistan
through conferences.
Infrastructure - can make more efficient/faster trading - Lack of trade routes will
routes to other countries/can agree deals discourage the investors to
to allow (landlocked) countries to trade via come in Pakistan to invest
Pakistan
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