Abstract:
This study narrates the history of trade liberalization in Pakistan from 1972 to 2021. It
outlines the history of trade reforms, which is divided into three distinct periods: the partial trade
liberalization period from 1972 to 1987, the trade liberalization period from 1988 to 2004, and the
post-liberalization period from 2005 to 2021. Existing studies of trade liberalization often overlook
the underlying explanations, which frequently fall within the realm of history and interests. This
paper addresses that gap and discusses the significance of domestic and international political
economy factors leading up to trade liberalization. In Pakistan, trade liberalization did not coincide
with compensatory real devaluation of the currency, as the exchange rate policy prioritized price
stabilization. Consequently, domestic policy rates remained high, resulting in an overvaluation of the
currency, which significantly reduced the rate of capital accumulation. The consumption-driven trade
liberalization contributed to the phenomenon of premature deindustrialization. As a result, the
country experienced low economic growth.
