LAHORE: Consumers in Pakistan face customs duty rates nearly four times more than the global average, which makes goods more expensive, according to a new study by UHY, an international accounting and consultancy network.
The study found that customs duties in Pakistan average seven percent of the total value of imported goods, whereas the global average in this regard is 1.8 percent of the total value of. This means that Pakistani consumers pay relatively higher prices for the goods than the consumers in many other parts of the world –including many developed economies.
UHY studied customs duties levied by 22 economies around the world as a percentage of the total value of their imports, as a simple indicator of the impact of a country’s trade barriers. The report points out that since 2006, Pakistan has been a member of South Asian Free Treaty Area (SAFTA) which also includes Bangladesh, Bhutan, India, Nepal, Sri Lanka, and Maldives.
Ibne Hassan, a member of UHY affiliated firm in Pakistan, said that customs duties can be a burden on the consumers and can often make everyday items more expensive. He said motivation to adopt a protectionist stance to protect jobs and nurture jobs can be very compelling. However, there is often a price to pay through higher costs of goods.
This tends to be particularly a huge burden on the budgets of low income consumers. Such policies could end up having an impact even on those industries that the governments are trying to protect, potentially effecting efforts to stimulate competitiveness or drive innovation.
Former president of the Institute of Chartered Accountants of Pakistan Naeem Akhtar Shiekh said, “We have seen many industrial sectors losing global competitiveness when governments gave heavy protection to domestic industries producing basic raw material for the main industries. This effectively increased the price of basic raw material much above the global rate.”
Pakistani textiles, he added, suffer mainly because of the protection provided to the local industry making manmade fibre. The result was that Pakistan has no presence in the global markets in blended textile products made with manmade fibres and cotton.
“Today, we have restricted our textile exports to cotton-based products only. The share of cotton-based products in global textile trade is only 20 percent,” Shiekh added.
Consumers in the US, UK and other developed economies benefit from half the customs duty rates compared to the global average, which enables them to save significant amounts of money, according to the UHY study. The report further found that among the major emerging economies, Brazil imposes relatively high rates with duties worth 7.6 percent of the total value of imports.
UHY found that customs duties in the G7 are, on average, just 0.8 percent of the total value of imported goods. The global average is 1.8 percent of the total value of imported goods.
This means that consumers in the G7 typically pay comparatively lower prices for goods than consumers in many other parts of the world – including many emerging economies - where costs are pushed up by higher import taxes.
In the US, where protectionism has been rising up the political agenda, raising the possibility that higher import duty may be levied; customs duties are currently worth just 1.3 percent of the value of imported goods.
This compares to 1.8 percent in China. European countries generally impose comparatively low rates - the European average is 0.4 percent - so British consumers could be at a significant disadvantage if the UK fails to keep duties at a similar level on leaving the EU. In the UK, where Brexit is also creating uncertainty over the future of UK trade deals, customs duties are currently even lower, worth just 0.5 percent of the value of imports.
The study pointed out that many free trade blocs, particularly the EU have helped in keeping low tariffs. Experts say that free trade agreements are becoming increasingly critical as well as a contentious policy area. They said some free trade agreements are under review because of protectionists move on the part of some governments.
The study of 22 economies revealed that the lowest tariff on imports is in France and Poland that generate only 0.3 percent customs revenues on their total imports. Bangladesh levies highest import duties on its imports that average 12.1 percent. In India the average import tariff is 6.6 percent.
