THE IMPACT OF CPEC ON TRADE STRUCTURE AND REGIONAL COMPETITIVENESS OF PAKISTAN

Abstract

Pakistan and China are common exporters of various goods and with CPEC the concerns about Pakistan’s export structure has risen. Along with its expected benefits, there exist a few threats as well. Threats to Pakistan include losing its exports significantly on account of gaining cost effectiveness by China and crowding out of domestic industries. This research has estimated revealed comparative advantage and growth trends of such common goods to evaluate the impact of CPEC on trade structure of Pakistan.  It is found that Pakistan has a comparative advantage in all its major exports over China but the growth in these commodities exports is higher for China. It is also observed that Pakistan is less vulnerable in exports of rice, cotton and textile while is more vulnerable in exports of Knit wear, leather, foot wear, sport and woollen carpets & rugs. Once CPEC is operational, China’s cost of production would decline much sharply via time and cost saved by using CPEC route, Consequently Pakistan would possibly be not in position to compete in exports of these commodities. Eventually, Pakistan’s exports or even production of these industries would be crowded out especially if the situation remained unconsidered by the government