Economic Effects of the Recently Signed Pak-China Free Trade Agreement

Samina Shabir () and Reema Kazmi ()
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Samina Shabir: Debt Office, Ministry of Finance Government of Pakistan, Islamabad.
Reema Kazmi: Debt Office, Ministry of Finance Government of Pakistan, Islamabad.

Lahore Journal of Economics, 2007, vol. 12, issue Special Edition, 174-202

Abstract: Factor endowments and cross country differences create regional disparities among states. The disparity in sizes between the Chinese and Pakistani economies can lead to the creation of trade patterns that can positively or negatively impact the latter’s economy. The present paper attempts to analyze the pros and cons of forming a Free Trade Agreement (FTA) with China given the size, structure and trade patterns of Pakistan’s existing economy. It also deals withthe crucial questions of: Can the formation of an FTA with China benefit Pakistan? Will trade liberalization under an FTA with a neighboring countrylike China spur Pakistan’s trade and growth? Looking at trends and trade patterns of Pakistan, the potential of Pakistan’s existingeconomy is analyzed to enhance interregional trade and export diversification by further deepening cooperation with China. In the light of this analysis, the paper also outlines a number of recommendations to extract the maximum benefit for Pakistan’s economy from this recently signed FTA with an old economic partner, China.

Date: 2007
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