Containing Imports This raises the fundamental question of the degree of success achieved by Pakistan in import substitution in the agricultural and manufacturing sectors respectively. Table 17.4 quantifies the extent of success in this process in agriculture, while the estimates for manufacturing are given in Table 21.3. Table 17.4: Extent of Import Substitution by The Agricultural Sector of Pakistan(At constant prices of 2005-06)(Rs in Billion) Value of Imports of Agricultural Goods Value of Domestic Production* of Agricultural Goods Total Domestic Consumption Extent of Import Substitution 2004-05 89 1632 1721 94.9 2009-10 193 3748 3941 95.1 2014-15 274 8356 8630 96.8 2018-19 1331 14688 16019 91.7 * Net of Exports of agricultural goods Source: Estimated. The state of import substitution in the agricultural sector has greatly worsened in the current year, 2020-21. For the first time in Pakistan’s history, there are large imports of three major agricultural items, viz, cotton, cereals, and sugar. The level of imports combined of these items is up by$ 2billion. 17.3. Measures for Import Containment The basic policy instruments that are available for containing imports are import tariffs and the exchange rate. The level of import tariffs has been scaled down periodically to promote the process of trade liberalization, especially during the tenure of IMF programs. There was a time before the mid-90s when import tariffs were set at exceptional high levels. The maximum tariff was as high as 120 percent and the principal source of FBR revenues was customs duty. Since then, the level of import tariffs has been brought down periodically as shown below. Table 17.5 gives the schedule of import tariffs and the average trade-weighted tariff since 2007-08. The average tariff was as high as 22.5 percent in the mid-90s. The effective rate of protection, measured as the difference in value added at domestic prices versus the value added at international prices, without tariffs, was as high as 177 percent. This provided a high level of profitability to import substituting investments. 169