The Impact of Shanghai Cooperation Organization Membership on Pakistan’s Manufacturing Exports: A Difference-in-Differences Gravity Analysis

Abstract

This study examines the impact of Pakistan’s membership in the Shanghai Cooperation Organization (SCO) on its manufacturing export performance, employing a Difference-in-Differences (DID) framework within a gravity-type trade model. Using panel data covering pre- and post-integration periods, the analysis compares Pakistan’s manufacturing exports to SCO member countries with those to non-SCO trading partners to identify the causal effect of SCO accession in 2017. Descriptive evidence indicates a gradual but more stable growth in manufacturing exports following SCO membership, with notable sectoral variation across industries. Empirical results reveal a positive and statistically significant effect of SCO membership on Pakistan’s manufacturing exports, confirming that regional integration has enhanced trade performance beyond pre-existing trends. The validity of the DID approach is supported by pre-treatment parallel trend tests, while robustness checks including placebo tests and Poisson Pseudo-Maximum Likelihood (PPML) estimation confirm the consistency of the findings. Heterogeneity Sectoral analysis shows stronger export growth in healthcare-related products, whereas traditional sectors such as textiles, minerals, and rubber exhibit relatively modest gains, reflecting ongoing structural constraints. Overall, the findings suggest that SCO integration has contributed positively to Pakistan’s manufacturing export expansion, though the benefits remain uneven across sectors. The study underscores the importance of complementary domestic policies, industrial upgrading, and trade facilitation measures to fully realize the export potential offered by regional economic integration.