Regional Integration and Export Performance: Evidence from Pakistan’s Trade with Shanghai Cooperation Organization (SCO)

Abstract

This study provides a comprehensive assessment of regional trade dynamics within the Shanghai Cooperation Organization (SCO), focusing on Pakistan’s export trends following its accession as a permanent member in 2017. The study conducts detailed pre- and post-accession analyses of   exports, trends show significant growth in trade with Central Asian partners such as Uzbekistan and Kazakhstan. Empirically, the Difference-in-Differences (DID) approach is applied within a gravity model framework using panel data for 2011–2023 to estimate the causal impact of SCO membership on Pakistan’s exports. The results are robust and statistically significant, indicating that SCO integration has positively influenced Pakistan’s overall export performance. Traditional gravity variables including GDP, population, distance, and shared language or border also behaved as expected, validating the broader applicability of the gravity model in this context.  Robustness checks including event studies, and alternative estimations using Fixed Effects (FE) and Poisson Pseudo-Maximum Likelihood (PPML) further validate the results.  The results suggest that SCO membership has continued to be a favorable determinant of Pakistan export performance. Moreover, the study indicates the importance of strategic infrastructure initiatives like CPEC and B&R initiatives, sectoral convergence, and regional interdependence act as key facilitators of trade expansion.  To best avail of trade facilitation potential of SCO, Pakistan must follow targeted trade policy, enhance its engagement with Central Asian markets, bordering its export diversification, and improve institutional coordination in the regional arrangement.