Abstract

This research investigates the welfare effect of economic costs and benefits of Pak-India trade with exporting
dried dates. The first scenario is when normal trading relation with India will be restored. It means that both
countries will give the MFN status to each other. in the second scenario, the SAFA will be operative and there
will be free trade between India and Pakistan and both countries will remora all tariffs and custom duties from
each other's imports. After employing the simplified static analysis framework, the analysis based on simulations
reveals that current demand for Khairpur dates will expand after the FTA and consumer surplus will increase.
The drop in the domestic prices of dates will increase the production of many down stream industries, which will
have pleasant multiplier effects on the economy. Overview of dates industry and results of economic analysis
indicate that Pakistan will get benefit from the FTA by getting the cheaper labor for which will increase their
competitiveness, and to reduce the costs of trade diversion in some commodities, the government should reduce
MFN tariffs on industrial dates before implementing the FTA a key rule of multilateral trade system is the
reduction in trade barriers should be applied, on a most-favored nation basis (MFN), to all WTO members. The
only exception to the MFN principle built into the GATT legal framework is the provision for reciprocal free
trade within customs unions and free trade areas (GATT article XXIV) objectives of the present study is to
analyze qualitatively and quantify the potential economic cost and benefits of prospective trade between India
and Pakistan to consumers, producers and government of the two countries for export of dried date under the
following two scenarios, i.e, when normal trading relations between Pakistan and India will be restored and
when there will be a free trade between Pakistan and India in the presence of South Asian Free Trade Agreement
(SAFTA). Following the analytical framework discussed by PO managerial (20001), we employ the simplified
static analysis for individual industries to instigate the welfare gains or losses.

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