International Business

Topic: Effects of Tariff

Presented To: Mr. Waqas Raza
Presented By: M.Hashaam
Roll no. : AM552381
Introduction of Tariffs
Definition:
A tariff is simply a tax (duty) levied on a product when it
crosses national boundaries.
Types of Tariffs
Import tariffs:
Taxes on goods that are imported into a country. They are
more common than export tariffs.
Export tariffs:
Taxes on goods that are leaving a country. This may be
done to raise tariff revenue or to restrict world supply of a
good.
Types of Tariff
Protective tariffs:
Tariffs levied in order to reduce foreign imports of a
product and to protect domestic industries.
Revenue tariffs:
Tariffs levied in order to raise revenue for the government.
Specific tariffs:
Tariffs that levy a flat rate on each item that is imported.
Ad valorem tariffs:
Tariffs based on a percentage of the value of each item.
Compound tariffs:
Tariffs that are a combination of specific tariffs and ad valorem
tariffs.
Reasons for Tariffs
To protect newly established domestic
industries from foreign competition.
To protect aging and inefficient domestic
industries from foreign competition.
To protect domestic producers from "dumping"
by foreign companies or governments.
To raise revenue.
LIST OF TARIFFS IN PAKISTAN
Following are the tariffs in Pakistan:
1 Import duty
2 Export duties
3 Regulatory duties
4 Additional customs duty
Impact of Tariffs
The redistributive effect
the transfer of consumer surplus, in monetary terms, to the
domestic producers of the import-competing product.
The protective effect
the loss to the domestic economy resulting from wasted
resources used to produce additional cloth at increasing
unit costs.
The revenue effect
the tariff proceeds paid to its government.
The consumption effect
arises from the decrease in consumption resulting from the
tariff's artificially increasing the price.
The terms of trade effect
the amount of the tariff revenue paid by foreigners because
the world price of their exports has fallen.
Case Study
TEXTILE INDUSTRY
OF PAKISTAN

The textile industry is often considered the
backbone of the Islamic Republic of Pakistans
economy.
Pakistans textile Industry is the fourth Largest
Cotton Producer.
6th largest importer of raw cotton
The Third largest Consumer


Introduction
INTRODUCTION

The textile industry contributes approximately 46
percent to the total output or 8.5 percent of the
country GDP.

In Asia, Pakistan is the 8th largest exporter of
textile products providing employment to 38
percent of the work force in the country.
OVERVIEW
Pakistans textile industry ranks amongst the
top in the world. Cotton based textiles
contribute over 60% to the total exports,
accounts for 46% of the total manufacturing
and provide employment to 38%
manufacturing labor force. The availability of
cheap labor and basic raw cotton as raw
material for textile industry has played the
principal role in the growth of the Cotton
Textile Industry in Pakistan.


HISTORY OF TEXTILE IND.
PIDC came into being which had the
main objective of industrializing the
country in major fields
The modern development of the sector
started in 1953 with the inauguration of
the Valika textile Mill at Karachi.

Pakistan's industrialization began in
the 1950s with the textile industry at
its center


1950s
HISTORY OF TEXTILE IND.
There was a rapid growth in spinning
sector.
Till 1980-81 spinning continued to
expand.
The eighties brought a relief to the
textile industry due to the boom in
international market and industry
friendly policies of the government.
1980s
HISTORY OF TEXTILE IND.
World demand for good quality, wide
width fabrics grew and replacement
and a modernization process started.
Machinery for producing garments and
made-ups was also freed from import
duty. As a result, a huge expansion in the
spinning sector took place in the first five
years of the 1990s.
The number of units rose to 440 in
1996-97
1990s
HISTORY OF TEXTILE IND.
Textile exports managed to increase at a
very decent growth of 16% in 2006.
Textile exports share in total export of
Pakistan has declined from 67% in 1997
to 55% in 2008, as exports of other textile
sectors grew
Textile exports in 1999 were $5.2
billion and rose to become $10.5
billion by 2007.
1999 to
2008
HISTORY OF TEXTILE IND.
10 percent of the spinning mills and
fabric printing units have shut down,
and half of the remaining plants are
struggling to survive
thousands of textile workers poured out
onto the streets of the city, burned tires,
and shouted slogans against the
government.
Pakistans $13.8 billion textile industry
is struggling to survive a critical
shortage of energy to run its plants.
2012
HISTORY OF TEXTILE IND.
Textile millers, workers in gas protest
2013

TEXTILE SECTORS CONTRIBUTION TO
THE ECONOMY OF PAKISTAN

According to the economic survey of Pakistan
2008-09 the Pakistan textile industry
contributes more than 60% to the country
total exports, which amounts to around 5.2
billion US dollars.
According to the 2012 Economic Survey of
Pakistan, issued by the finance ministry, the
textile industry itself constituted about 4% of
the total size of the economy.
TOP BUYERS OF PAKISTANI TEXTILE
GOODS ARE


USA, EU, Gulf region, UK, Hong Kong, Japan,
Korea, Saudi Arabia, Italy, Turkey, Germany,
Norway, France, Canada, Sweden, Australia,
etc.
TEXTILE NEWS
Textile industry of Pakistan worst hit by
power cuts
The energy crisis has forced the textile mills
to close their units, especially in Punjab the
industry is under severe pressure. Chairman
APTMA Punjab, Shahzad Ali Khan, said daily
electricity load shedding has increased to 12
hours.

A spokesman for the All Pakistan Textile Mills
Association (APTMA) claimed that 60 to
70 per cent of the industry had been affected
and was unable to accept export orders coming
in from around the globe, as a result of gas
load shedding
Textile Industry Pros And Cons
Pakistan has the
advantage of cheap
labor as compared to
its competitors, but
unfortunately the
labor productivity is
very low
ADVANTAGE
There are hardly any
training programs to
develop on the skills
of these labors and
the craftsmen depend
upon their inherited
skills with no
advancement and
DISADVANTAGE
STRENGHTS
Self reliance
Manufacturing flexibility
Abundance of raw material production 32
Design expertise
Availability of cheap labour
Growing economy and domestic market
Progressive reforms
WEAKNESSES

Research & Development (R&D)
Developed countries are using the technology of
biotechnology and genetic engineering to increase the quality
and quantity of their cotton production. In Pakistan, there is
very some research done on small scale by private companies.
Practically no efforts are being made by the APTMA in the
R&D of the textile industry to enhance the quality of its
products.

WEAKNESSES
Highly fragmented sector
High dependence on cotton
Lower productivity
Declining mill segment
Technological obsolescence
Nonparticipants in trade agreements
WEAKNESSES
Poor quality standards.
Pakistans textile industry should focus on
latest material handling techniques and
should train workers. The inability to timely
modernize the equipment, machinery and
labor has led to the decline of Pakistani textile
competitiveness
THREATS
New competitors
Pakistan is facing new competitors in textile sector such as
Bangladesh, Vietnam and Turkey. Though we cannot avoid
competition but we can always stay ahead of them by
reforming our strategies and educating our entrepreneurs
so as to move one step forward in every aspect.

Phasing out of quota system
As the quota system is ruled out by WTO, there is a threat
by the Chinese and Indian manufacturers to gain most of
the market share. We have high costs, low labor
productivity and inefficient production processes.

THREATS

3. Fashion life cycle
Fashion changes day by day these days. Media has so much
penetrated in our daily lives that we easily adapt ourselves
as it wants us to. This has resulted in shortening the fashion
lifecycle thus increasing the fashion risk.
Now the buyer does not want to wait long for his
consignment because he is insecure that by the time it will
reach to him he will lost its demand due to change in
fashion. Therefore, they prefer to buy from neighboring
countries even at higher cost to get their products instantly
rather than to wait weeks or months for their consignments
to reach them.

Stiff competition from developing countries;
especially China and India.
Pricing pressure
Locational disadvantage
International labour and environmental laws
CONCLUSION
Textile industry is the backbone of the Pakistans
economy. The textile industry of Pakistan plays an
important role in earning foreign exchange,
providing employment to the country. Pakistans textile
industry is going through one of the toughest periods in
decades. Our textile sector needs to capitalize on the
new emerging opportunities by adhering to global
best practices, adapting rapidly changing technologies,
better supply chain management while
trying to reach global value chains.
RECOMMENDATIONS
Remedy Though Foreign Direct Investment (FDI)
Image Building Of Pakistan To Attract Foreign Direct
Investment (FDI)
Subsidy Removal Should Be Taken A Back
Interest Rate Should Be Low Down In Order To
Survive This Industry
Electricity & Gas Tariff
Removal of Energy Crisis
Exploration of new Export Markets
Reducing the cost of doing Business in Pakistan

Thank You