Export Competitiveness and Comparative Advantage of Pakistan’s Non-agricultural Production Sectors: Trends and Analysis

The composition and volume of global trade has witnessed significant changes during the last two decades. Trade liberalisation, rising income and technological advancements, have been the main determinants. Against the backdrop of a rapidly changing global export pattern, and the success of Southeast Asian economies, there is a strong case for Pakistan to pursue an export-led growth strategy that leads ultimately to improve living standards. However, given Pakistan’s past macroeconomic performance and its current export structure, such a turnaround would require a major structural transformation of the economy and changes in its export specialisation patterns. In the context of on-going multilateral trade negotiations, this paper analyses the comparative advantage/disadvantage of Pakistan’s non-agriculture production sectors, by using the revealed comparative advantage (RCA) approach at HS 4-digit levels. This is to provide a unique understanding of challenges and opportunities that Pakistan’s non-agricultural sector faces, as it becomes rapidly integrated into global markets. It is important to note that supply and demand side conditions play a crucial role in changing comparative advantage profile of a country. The objective of this study is to identify those non-agricultural export categories, in which Pakistan is losing, gaining or maintaining its comparative advantage. Following the “stages of comparative advantages” thesis by Balassa, an attempt is made to examine the extent to which Pakistan’s leading non-agriculture product lines have witnessed a shift in their comparative advantage away from traditional labour-intensive production to export of technology based production activities. This insight is important to assess