AGRICULTURAL TRADE BETWEEN PAKISTAN AND UNITED ARAB EMIRATES: PERFORMANCE, COMPETITIVENESS AND DETERMINANTS

Abstract

Major trading partners of Pakistan are China, United Arab Emirates, Saudi Arabia and Unites States of America. United Arab Emirate is the trading partner of Pakistan with 10.9 percent share of total trade. Export share of Pakistan to United Arab Emirates is 8.5 percent of its total exports. Import share of Pakistan from United Arab Emirates is about 12 percent of its total imports. Major agricultural export products of Pakistan to UAE are rice, meat and cotton yarn. Major imports of agricultural products include dried vegetables, sugar and dairy products. Objective of the study was to elaborate the trade of major agricultural products between Pakistan and United Arab Emirates, with a focus on analysis of major factors affecting the agricultural trade, competitiveness and comparative advantage of major agricultural products traded between Pakistan and United Arab Emirates. Impact of different variable was determined by the application of gravity model by using the panel data methods. Variables that were used are total trade, population, GDP, distance between trading partners, and dummies for border and cultural similarities. Competitiveness in agricultural trade was estimated by nominal protection coefficient (NPC). To estimate the comparative advantage of Pakistan for specific products, approaches of revealed comparative advantage (RCA) and revealed systematic comparative advantage (RSCA) were used. For this purpose data for analysis were obtained from suitable sources. According to the results of gravity model of trade GDP of Pakistan has a positive and significant impact on agricultural trade with United Arab Emirates. GDP of United Arab Emirates has a positive and significant impact on agricultural trade between Pakistan and United Arab Emirates. Population of United Arab Emirates has positive and significant Impact on agricultural trade. Increasing Population of Pakistan has a negative and significant impact on agricultural trade with United Arab Emirates. It implies that population variable has the trade inhibiting affect. It implies that a larger population size may be treated as large resource endowments and thus an indication of selfsufficiency and thereby less reliance on international trade. Dummy variable of cultural similarities has a significant and positive impact on agricultural trade and the joint border has negative and significant impact on trade of Pakistan. Distance between trading partners has a negative impact on agricultural trade but this was not significant. The value of NPC 11 shows that Pakistan is losing its competitiveness in basmati exports. So there was need to find other markets where its competitiveness is more as compared to United Arab Emirates. Furthermore the basmati growers should be given proper subsidies and the policies should be made to keep the domestic prices of basmati low, to make Pakistani basmati rice more competitive in international markets as compared to its main competitors. Increasing values of RCA index of basmati rice shows that Instead of losing competitiveness of basmati rice Pakistan has comparative advantage in basmati rice. There is need to maintain both the competitiveness and comparative advantage at the same time and for this purpose the government should play its role by changing the existing price policies. NPC of beef remained less as compared to Mutton that means Pakistani beef is more competitive as compared to mutton. It was concluded that Pakistan should focus more on beef for its exports growth as compared to mutton. The analysis increasing trend of RCA indices for the previous 10 years of both mutton and beef shows that the Pakistani beef has more comparative advantage as compared to mutton. Pakistani beef is more competitive having more comparative advantage showing that there are some issues in the mutton exports as compared to beef. Pakistan should try to find other markets for its mutton. Pakistan should focus on the both the mutton and beef to enlarge in export value. Pakistan has competitiveness in the cotton yarn but it is not a strong competitiveness. Pakistan has comparative advantage in export of cotton yarn. Pakistan can produce milk at low cost and can export to get high margin but due to the domestic demand it is not possible. Pakistan has strong competitiveness in milk but still is not able to export the milk to the other countries. There is need to make more growth in dairy sector and government should give more attention toward this sector. Value of NPC of sugar more than unity was showing that international prices were less than the domestic prices and Pakistan has no competitiveness in the sugar. Pakistan is an exporter of fresh vegetables but at the same time Pakistan is also importer of the dried vegetables. There is lack of value addition in vegetables. There is need of value addition in the sector of vegetable as there is demand of dried vegetables in Pakistan but there is lack of supply of the dried vegetables to fulfill its demand. Dried vegetables are imported and the Pakistani consumers pay more for these products. There is also lack of adoption of value addition in this sector.