Polyethylene, polypropylene: Tariff cuts must reflect in export growth: expert
ISLAMABAD: The government’s policy of reducing tariffs on imported raw materials needs to be reviewed against actual export performance, as available trade data suggest that substantial tariff concessions on polyethylene (PE) and polypropylene (PP) have led to a much larger increase in imports than in downstream exports.
An expert, while analysing the impact of tariff liberalisation under the National Tariff Policy (NTP), said the policy was based on the assumption that cheaper imported raw materials would reduce production costs, improve the competitiveness of downstream industries and ultimately generate higher exports.
“The question is whether the tariff concession has actually delivered the export growth for which it was introduced, or whether it has primarily subsidised imports for the domestic market,” according to the expert.
According to the analysis, customs duty on the principal polymer tariff lines-Pakistan Customs Tariff (PCT) 3901.10, 3901.20, 3902.10 and 3902.30 was reduced from 11 percent in FY 2021-22 to 3 percent in FY 2022-23 and subsequently to zero from FY 2025-26.
The overall import-stage incidence, after accounting for customs duty, additional customs duty, sales tax and withholding tax, also declined considerably.
“This is a substantial liberalisation of the import regime,” the expert said. “The relevant question is what additional economic activity and export earnings have been generated as a result.”
Citing Trade Map data, the expert pointed to a significant increase in polymer imports after the tariff reduction.
The expert noted that between 2022 and 2025, PE resin imports increased by approximately 51,500 tonnes, while PP resin imports increased by approximately 148,192 tonnes. At 2025 prices, the additional imported resin represents roughly USD 202 million.
During the same period, PE downstream exports increased by only USD 3.5 million, while PP downstream exports increased by approximately USD 26.1 million.
“The data shows a much stronger response on the import side than on the export side,” he said.
Experts question whether tariff cuts are the right export-promotion tool.
The tax expert said the figures raise a broader policy question because exporters already have access to duty and tax relief on imported inputs under the applicable Export Facilitation Scheme, subject to prescribed conditions and export-performance requirements.
“If an exporter is already able to import its raw material without customs duty under an export-facilitation mechanism, reducing the general tariff from 11 percent to zero does not provide the same incremental benefit to that exporter. The wider benefit goes to all importers, including those supplying the domestic market,” he explained.
According to the expert, this distinction should be considered when evaluating the NTP.
“If the stated objective is export promotion, we need to ask why a broad-based tariff concession is being used when a targeted, performance-linked mechanism for exporters already exists.”
The expert also highlighted the fiscal implications of the tariff reduction.
Based on the reduction in customs and additional customs duty rates applied to actual import values, he estimated that the customs-duty revenue forgone on the four polymer tariff lines in 2025 alone was approximately USD 83.6 million.
The expert cautioned that tariff reductions may have objectives other than export promotion, including reducing input costs, supporting domestic industry and improving competitiveness.
“But where export promotion is the principal justification for a tariff concession, the additional export earnings should be measured against the revenue sacrificed,” he said.
“Exchange-rate movements, international polymer prices, changes in domestic capacity and global demand all affected trade during this period. Therefore, an increase in exports after a tariff reduction does not by itself establish that the tariff reduction caused that increase.”
He said the appropriate approach was to compare the scale of the tariff concession with the incremental exports generated after accounting for other relevant factors.
The tax expert suggested that the NTP should be subjected to a systematic, periodic review based on measurable outcomes.
Such a review, he said, should compare revenue forgone through tariff concessions; additional import volumes and values; changes in domestic production; capacity utilisation; downstream exports; and foreign-exchange earnings generated.
“The data is available. The same exercise can be carried out across the thousands of tariff lines that have been liberalised. If a tariff reduction was justified primarily as an export incentive, we should be able to measure the exports generated against the revenue given up.”
He stressed that his argument was not against tariff rationalisation.
“Tariff reform can have legitimate economic objectives. The issue is whether a general tariff reduction is the most effective instrument for achieving a specific export objective when targeted export-facilitation mechanisms are already available.”
The PE and PP experience, he said, provides a useful case study for the broader review.
“Tariff policy should ultimately be judged by the economic outcomes it produces-not simply by how much the tariff has been reduced”, he added.
Copyright Business Recorder, 2026