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 whichsqueezes to 336,000 hectares in 2005. This tempted to investigate through economic welfare analysis using pre- andpost-WTO domestic policy regimes, the reasons for falling area under rapeseed crop. The study is based oneconometrically estimated supply and demand functions of Pakistan s rapeseed crop, government policies andinterventions prevailed during the study period, estimated welfare effects associated and simulated implications ofthe implementation of WTO s trade liberalization domestically and abroad. The findings of the research indicatethat rapeseed crop had been subje cted to no export regime during 1985-1995 and price support regime during1995-2005. These policy regimes resulted in such welfare effects which showed higher losses to consumers (PakRs.2275.22 million per year) than gains to producers (Rs.1183.34 million per year) during the latter period ofthestudy. Free trade simulation results confirmed larger gains to consumers than losses to producers. If tradeliberalization was introduced in world market, it would have resulted in additional gains (Rs.1527.75 mil/ion) toconsumers than losses (Rs.795.35 mil/ion) to producers. The recommendations made in light of the results are thatfirst , state level price interventions should be reduced so that gap between domestic and international prices couldbe curtailed. Second, trade liberalization at domestic level needs to be geared up so that world prices prevail indomestic rapeseed market. Third, Pakistan should support efforts aimed at implementation ofWTO s induced tradeliberalization internationally and particularly in major economies of the world. Fourth, Government of Pakistanshould slowly but surely diminish its role in trading through State Trading Enterprises (STEs) and act as facilitatorof trade as envisaged in the WTO regime. Simultaneously focus should be on research and development orientedinvestment covering quality aspects.