Pakistan’s tariff debate has run for decades on two competing assertions. Protectionists argue that domestic industry needs protection to develop scale and become internationally competitive. Liberalisers contend that duties on imported inputs raise production costs, encourage inefficiency and discourage exports. Both sides routinely draw on international experience, while paying remarkably little attention to Pakistan’s own experience with firms that have operated under substantial tariff exemptions for decades.
That experience matters now. The National Tariff Policy 2025–30 envisages progressively reducing customs duties and eliminating additional and regulatory duties to address the anti-export bias of Pakistan’s tariff structure. The reforms are intended to improve industrial competitiveness and accelerate export growth. Their economic justification, however, would be considerably stronger if informed by evidence of how similar exemptions have performed in the past.
The most obvious starting point is Pakistan’s Export Processing Zones (EPZs). Established under a separate regulatory framework in 1980, these zones allow enterprises to import qualifying machinery, raw materials and intermediate inputs free of customs duties. Pakistan has therefore maintained a distinct tariff regime for selected industrial enterprises for more than four decades, providing an opportunity to examine whether insulation from import duties has translated into greater export competitiveness.
EPZs are not a perfect comparison. Enterprises operating within them also enjoy exemptions from national import regulations and exchange controls, distinct tax arrangements and dedicated administrative facilities. Their performance reflects the combined influence of these arrangements, alongside the characteristics of firms that choose to operate in the zones. The effects of tariff exemptions cannot be isolated through aggregate comparisons alone.
Nevertheless, the available evidence warrants closer examination. A January 2026 PIDE publication, based on research undertaken for the Export Processing Zones Authority (EPZA), reported combined exports of $910 million from six operational zones in 2023, representing approximately 3.3 percent of Pakistan’s goods exports. Karachi accounted for about $665 million. The study also found that approximately 86 percent of raw materials used by Karachi EPZ enterprises were imported from abroad, while investors complained of manual procedures and overlapping regulatory controls.
The relatively modest scale of these exports, after decades of preferential treatment, raises an important question about the limits of tariff exemptions in promoting industrial competitiveness. The explanation may lie in the structure of industries operating within the zones, their administrative arrangements, access to financing or the wider economic conditions affecting Pakistani producers. Establishing the relative importance of these constraints requires a comparison of firms rather than an assessment of aggregate export figures.
A more precise test is available through the Export Facilitation Scheme (EFS).
Introduced in July 2021, EFS allows authorised exporters outside EPZs to import qualifying production inputs free of duties and taxes. These enterprises remain within the domestic tariff area and operate under the broader regulatory framework applicable to other Pakistani businesses. The scheme initially operated alongside earlier export facilitation arrangements before absorbing them.
According to official sources reported by Business Recorder in June 2026, the number of EFS licences increased from approximately 800 to 2,000. The expansion of the scheme, the different dates on which firms obtained authorisation, and successive changes in import duties create an opportunity to examine how tariff relief affects export performance.
Such an assessment would compare changes in exports, imported inputs and domestic value addition among firms receiving tariff exemptions against otherwise comparable firms facing different levels of effective tariff exposure. Historical participation in earlier facilitation schemes would need to be accounted for, since EFS authorisation does not necessarily represent a firm’s first access to duty-free inputs. Differences in industrial activity, firm size, export markets and prior performance would also need to be incorporated.
The comparison could be strengthened by exploiting changes in tariff rates across products and over time. Pakistan has repeatedly reduced, increased or exempted duties on different imported inputs. These variations provide a basis for examining how firms responded when their actual input costs changed, separating the effects of tariff policy from broader movements in exports.
The administrative information required for this analysis already exists across several government institutions.
EPZA maintains records of registered enterprises and is empowered under Rule 24 of its governing rules to require monthly reports on production, imports and exports. The Federal Board of Revenue records customs declarations through WeBOC, including imported products, transaction values, applicable duties and exemption arrangements. Pakistan Single Window integrates trade-related information, while historical customs schedules provide the tariff rates applicable to individual products.
Furthermore, the Pakistan Single Window Trade Data Dissemination, Exchange and Utilization Rules, 2023, provide a mechanism for authorised access to disaggregated trade information for academic research and policy analysis, subject to confidentiality requirements.
These records provide the basis for constructing a longitudinal dataset covering EPZ enterprises, EFS beneficiaries and other exporters, with details of their imported inputs, effective tariff exposure and export performance. Linking these records with production and financial information would allow the analysis to extend to investment, profitability and domestic value addition.
The immediate requirement is for EPZA, FBR and Pakistan Single Window to assemble these records into an anonymised firm-level panel and facilitate access for accredited researchers. Such an exercise would provide evidence that is directly relevant to the tariff reforms currently being implemented.
Three broad findings are possible.
If enterprises benefiting from lower input duties demonstrate stronger export growth, productivity and domestic value addition than comparable firms facing higher duties, the evidence would strengthen the case for tariff rationalisation. It would also identify the industries and inputs where tariff reductions generate the greatest economic benefits.
If comparable enterprises enjoying substantial duty exemptions show little improvement in export performance, the findings would challenge the expectation that lower import duties alone can deliver a meaningful expansion in exports. The explanation would have to be sought in other constraints that remain after tariffs are removed, including productivity, energy costs, working capital, logistics, technological capabilities and exchange-rate competitiveness.
A third possibility is that tariff exemptions improve profitability or encourage greater imported-input consumption without corresponding increases in exports or domestic value addition. Such a result would raise questions about the extent to which the financial benefits of tariff relief translate into additional productive activity.
Tariffs protecting finished goods require a separate assessment, since their effects extend to domestic prices, import competition, downstream industries and investment incentives. Evidence on the consequences of duty-free imported inputs would nevertheless provide an important foundation for evaluating Pakistan’s broader tariff structure.
Pakistan has repeatedly revised its tariff policies, extending protection to selected industries while granting exemptions to others. These decisions have created decades of variation in tariff exposure across enterprises and products, alongside extensive administrative records of their economic activity. Yet this information has not been assembled into a comprehensive, independently accessible evaluation of how tariff exemptions have affected export performance.
The National Tariff Policy 2025–30 provides an opportunity to correct that omission. Evaluating the experience of EPZ enterprises and export facilitation beneficiaries would help establish where tariff reductions improve competitiveness, where their effects are limited and which other constraints determine industrial performance. It would also provide a stronger basis for distinguishing protection that supports productive investment from protection that primarily transfers economic benefits to existing producers.
The effectiveness of Pakistan’s tariff structure should ultimately be assessed through the performance of the enterprises operating under it. The administrative evidence accumulated over several decades provides a substantial starting point for doing so.
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