Access to Foreign Markets: Insights from the Pak-China FTA
March 11, 2026
What the Data Shows
Using data from the Census of Manufacturing Industries (CMI) for Punjab (2000, 2005, and 2010), the study analyzes how textile firms responded before and after the FTA.
Productivity and Quality
Exporting textile firms experienced modest productivity gains of 6–8%
Product quality improved slightly (1–2%)
Gains were mainly concentrated in the spinning segment, which benefited most from tariff reductions
Firm Behavior
Exporting firms increased labor and material inputs
Capital investment showed little change
Firms reduced product variety, focusing on fewer product lines
Pricing and Markups
Exporting firms reduced product prices
Prices declined more than marginal costs, resulting in lower markups
Demand Patterns
Demand elasticity varies across textile segments:
Interior textiles and clothing are the most price-elastic
These sectors could gain more market share if market access expands further
Spillover Effects
The study also finds positive spillovers:
Exporting firms generated productivity and quality spillovers for nearby non-exporting firms
Effects were strongest among upstream suppliers in the production chain
Key Insight
While the Pak-China FTA increased trade flows, it did not significantly transform productivity or competitiveness in the textile sector during the period studied.
Limited capital investment and slow product upgrading constrained firms from fully benefiting from new market access.
Takeaway
Market access alone is not enough.
To fully benefit from trade agreements, Pakistan needs complementary policies that support investment, technology adoption, and industrial upgrading.
Source
Jamil, N., Chaudhry, T., & Chaudhry, A. (2023). Access to Foreign Markets: An Analysis of the Pak-China FTA. In Policy Challenges for Macroeconomic Management and Growth in Pakistan, Lahore School of Economics.
https://itc.lahoreschool.edu.pk/assets/uploads/books/Book%202023%20_Chapter%205.pdf
Access the book, Policy Challenges for Macroeconomic Management and Growth in Pakistan, and all its chapters here: https://itc.lahoreschool.edu.pk/researchBooks/19
Labels: FTA, Lahore School, Macroeconomics, Manufacturingsector, Pakistan, Research, Trade
posted by S A J Shirazi @ 3/11/2026 03:12:00 PM,
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