Assessing Pakistan's trade comparativeness and coplementarities with Asian and OECD countries

The pattern of comparative advantage provides a solution for the expansion of trade by identifying those products that have the potential for trade, where different products become tradable which is not considered before. This study attempts to assess the comparative advantage of Pakistan with Asian and OECD countries. The objectives of the study are threefold: First to check the Revealed Comparative Advantage (RCA) of Pakistan‟s export with 76 countries (43 Asian and 33 OECD), by using the method of Balassa index. Secondly to check the Pakistan„s Trade
Complementarity Index (TCI) with TCI of 76 countries in order to find out the potential area for boosting its exports. Thirdly to analyze the long run relationship between Pakistan‟s export with 76 countries and Pakistan‟s economic growth. The data used for this analysis are 96 product categories with yearly data selected for
RCA and TCI over the period of 2001 to 2016. In order to check the long run relationship between export and economic growth, annual data from 1982 to 2016 are being used. The results show that Pakistan has a comparative advantages in 29 product categories and able to export these products to 76 countries in which they
have comparative disadvantage. Similarly, results of TCI show that Pakistan‟s exports match well with the import of 59 countries. Long run relationship has been tested using co-integration mechanism and feedback relationship has been measured using Granger causality pairwise. Results revealed that there is positive and
significant relationship between exports and economic growth. Moreover, results of Granger causality pairwise show that export Granger influence GDP as the export toward these 76 counties will increase economic growth of Pakistan. Based on the empirical results; it shows that policy implications will lead to an enhancement in Pakistan‟s export which ultimately will lead towards an increase in the economic growth of Pakistan.