2nd Phase of China-Pakistan FTA begins

KARACHI: Ministry of Commerce has initiated sectoral public consultation campaign as the proposal for 2nd phase of China-Pakistan Free Trade Agreement (CPFTA) is being formulated, which government wants to be favorable for Pakistan this time.

According to a letter issued by Commerce Division to all registered trade bodies, a series of meetings with all stakeholders will be held November 28, 2017 onwards to discuss tariff lines (items), which local businesses are desirous of gaining market access in China.

An official said government intended to protect the local industry and tariff lines, in which local trade bodies wanted to be protected would be proposed to be incorporated in the exclusion list.

Trade associations are advised to convey their recommendations to the ministry including the tariff lines in which these associations were desirous of phase-II liberalization i.e. over the period of 10-15 years.

Chinese officials claim that after conclusion and implementation of the second phase of China-Pakistan Free Trade Agreement (CPFTA), Pakistan will be able to expand its exports to China with the help of low tariff rates and attract more Chinese investment in the next five years.

However, officials at Ministry of Commerce in Islamabad emphasize the gains for both sides should be equal at least. It may be mentioned here following the FTA, Pakistan’s trade deficit with China widened markedly, surging from $2.9 billion in 2006-07 to $12.7 billion in 2016-17. Last year, imports from China alone accounted for 36 percent of Pakistan’s global non-oil imports.

Pakistan and China had earlier agreed to revise the FTA by end-December 2015. However, Chinese authorities were reportedly unwilling to accept Pakistan’s demand to revive preferential treatment for exportable products under the second phase of the FTA. As per the original agreed plan, the second phase was supposed to be implemented from January 1, 2014.

Local businesses time and again expressed concerns regarding insufficient utilization of concession given by China to Pakistan and competition faced by the local industries due to cheap imports from China.

According to a report, Pakistan could not utilize the concessions granted by China under the first phase as it only exported in 253 tariff lines, where average export value was $500 or more, which was around 3.3 percent of the total tariff lines (7,550) on which China granted concessions to Pakistan.

Pakistan’s key exports to China were raw material and intermediate products, such as cotton yarn, woven fabric, grey fabric, etc. Value-added products were missing despite the fact that some of these products like garments were included in the concessionary regime.

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