IMPLICATIONS OF TRADE LIBRALIZATION ON ECONOMIC WELFARE OF PRODUCERS AND CONSUMERS OF RAPESEED IN PAKISTAN

Rapeseed is one of the major crop of Pakistan. It occupied an area of 370,000 hectares in 1980 which squeezes to 336,000 hectares in 2005. This tempted to investigate through economic welfare analysis using pre- and post-WTO domestic policy regimes, the reasons for falling area under rapeseed crop. The study is based on econometrically estimated supply and demand functions of Pakistan’s rapeseed crop, government policies and interventions prevailed during the study period, estimated welfare effects associated and simulated implications of the implementation of WTO’s trade liberalization domestically and abroad. The findings of the research indicate that rapeseed crop had been subjected to ‘no export’ regime during 1985-1995 and ‘price support’ regime during 1995-2005. These policy regimes resulted in such welfare effects which showed higher losses to consumers (Pak Rs.2275.22 million per year) than gains to producers (Rs.1183.34 million per year) during the latter period of the study. Free trade simulation results confirmed larger gains to consumers than losses to producers. If trade liberalization was introduced in world market, it would have resulted in additional gains (Rs.1527.75 million) to consumers than losses (Rs.795.35 million) to producers. The recommendations made in light of the results are that first, state level price interventions should be reduced so that gap between domestic and international prices could be curtailed. Second, trade liberalization at domestic level needs to be geared up so that world prices prevail in domestic rapeseed market. Third, Pakistan should support efforts aimed at implementation of WTO’s induced trade liberalization internationally and particularly in major economies of the world. Fourth, Government of Pakistan should slowly but surely diminish its role in trading through State Trading Enterprises (STEs) and act as facilitator of trade as envisaged in the WTO regime. Simultaneously focus should be on research and development oriented investment covering quality aspects.