Analyzing the Trade Effect of Pakistan and Malaysia Free Trade Agreement
International Islamic University, Islamabad, Pakistan
This research scrutinizes quantitative effects of Pakistan-Malaysia Free Trade Agreement(FTA) on macroeconomic and trade variables. For that purpose, this study used a multiple country general equilibrium model, namely the Global Trade Analysis Project (GTAP) model. The model simulates the economic impact of the tariff eliminations under this bilateral agreement. The results depict that under bilateral Pakistan- Malaysia FTA, the real GDP of Pakistan is negative while Malaysia's real GDP is positive. There is trade deficit of Pakistan while Malaysia has trade surplus. Moreover, Malaysia's welfare gain is positive, but Pakistan is the loser in net welfare. In fact, Pakistan does not get the benefit from this FTA, however, Pakistan identify potential exports sectors such as process rice, textiles, wearing apparel, chemical products, plastic, rubber, metal products, cement and machinery and equipment. Thus, Pakistan may be develop the long term strategy to focused on theseindustries and allocate the resources efficiently on these sectors. In this way, Pakistan improves its exports to enhance its GDP growth, trade balance and welfare.
Keywords: Pakistan-Malaysia Free Trade Agreement, Computable General Equilibrium Model, GTAP