Introduction
International trade plays a very important role, and it is a major source of economic
growth. International trade directly contributes in economic development. It is also a
source of generating foreign exchange. This research and literature has focused on
international trade as the prime driver of the economy and the growth in economy
by the imports and exports. The focus of every nation is to increase their economic
growth and improve the quality life of the citizens living in their country.
International trade is a life blood of a global economy. Basically, when a good and
services is produces in one country and sold to a person or businessman in other
country then these goods and services are an export for one country and import for
that other country. Pakistan is one of the largest importers of goods and services in
the world. In 2022 Pakistan imports was 82.28 billion US dollars which show a
31.32% increase from 2021. Exports of Pakistan in 2022 was 39.42 billion US dollars
a 24.49% increase from 2021.
Pakistan import stuff like oil, Automobile, machinery, chemicals etc from countries
all over the world. If we look around local stores and shopping canters, we feel like
everything is made in China, Japan and other countries. This proves that we import
a lot of things from many countries. But in term of both import and export our
largest trading partner is China. Pakistan trade (Import and Export) in many things
like petroleum, machinery, chemicals, leather, cotton, rice, mangoes, medicines,
surgical equipment etc.
Pakistan’s 40% imports are originated from just seven countries. These countries
are USA, Japan, Saudi Arabia, China, Germany, United Kingdom, and Malaysia. Saudi
Arabia is emerging as a major supplier to Pakistan followed by the USA, China and
Japan. Pakistan trade with many countries and many countries gave priorities to
Pakistani goods because of its low price and low exchange rate. These countries are
USA, Hong Kong, Saudi Arabia and Germany. USA is one of the largest export
markets of Pakistan.
1.2 LINK OF INTERNATIONAL TRADE WITH GDP
Exports are goods and services produced domestically but sold abroad and imports
are goods and services produced abroad but sold in Pakistan. Imports are produced
in other country and are counted in that country GDP like a cell phone produced in
America is counted in American GDP it cannot be counted twice that is they cannot
be counted in our GDP.
To understand the link of GDP with trade (import and export) here we take equation.
GDP = C + I + G + (X - M)
We focused on the last part of the equation (X-M). This part is known as net exports.
This is the result of subtracting Exports (X) from Imports (M). Here in this equation
point to be noted is that all variables form GDP except imports (M). The M variable is
subtracted from GDP because GDP measure domestic production. Domestic
production mean goods and services produced inside a country. Imports are not
produced domestically so subtracting in necessary.
1.3 SIGNIFICANCE OF STUDY
The study on “Impact of international trade on economic growth” hold great
importance. In this study we look that How international trade put impact on
economic growth of a country and overall economic performance. Our aim is to
develop policy recommendations for the policy makers to obtain and make ease for
the growth of economy.
1.4 OBJECTIVE OF STUDY
The objective of the study is to examine how international trade put impact on the
economic growth of a country. In case of Pakistan.
1.5 RESEARCH QUESTION
What is the impact of international trade on economic growth in case of Pakistan?
Does it affect positively or negatively?