FTA-II talks with China from December 5

 Beijing likely to express disapproval of regulatory
duty on its products by Pakistan

ISLAMABAD: Beijing is likely to express its annoyance in the much awaited talks for free trade agreement (FTA-II) to be held in Islamabad on December 5-7 over the regulatory duty (RD) on Chinese products by tax authorities in Pakistan saying that it was tantamount to violation of the existing China Pakistan Free Trade Agreement (CPFTA).

China has time and again shown its annoyance over imposition of regulatory duty on products being exported to Pakistan terming that it is inconsistent with the bilateral trade agreement and requested Pakistan to erase the said duty. Now China is all set to agitate the issue of regulatory duty in its products in the forthcoming meeting to be held on December 5-7 in Islamabad that will hold the stalled talks on FTA-II.

Pakistan says that regulatory duty has been imposed on MFN basis arguing that comparative advantage still exit for Chinese imports vis-à-vis others.

Pakistan authorities tried to satisfy Chinese counterparts saying that regulatory duty is not much covering the 80 percent of total import value from China during the fiscal 2014-15, for 255 tariff lines taken up by Chinese side. And Pakistan’s authorities also argued that regulatory duty imposed on Chinese products is not violative of Article-9 of China Pakistan Free Trade Agreement and agreed to provide further legal information regarding the duty to address Chinese concerns.

Earlier Pakistan wanted the non-reciprocal tariff concessions from China in phase-II to compensate the loss in trade the country is suffering on account of existing FTA-I. However, China had earlier flatly refused to extend the one sided tariff concessions owing to which talks for FTA-II got stalled.

Beijing had assured Pakistan authorities concerned that it would extend unilateral tariff concessions regime to Pakistan under phase II of China-Pakistan FTA to balance the trade going on under FTA-I which is heavily tilted towards China.

The Chinese authorities later backed out of its earlier stance and instead asked Pakistan to further liberalise its tariff regime by up to 90 percent. This had really irked the authorities in Islamabad as Pakistan in first phase of FTA had reduced the tariff on 35 percent items to zero percent. Now, both sides have decided to re-start dialogue on FTA-II.

Now under latest scenario, Beijing wants Pakistan to further liberalise its tariff regime by up to 90 percent.According to the trade volume between the two countries, the imports from China stands at $9 billion while Pakistan’s exports to China stand at $2 billion and the trade balance is in favour of China.

However, the sources also claimed saying as domestic industries are at risk of being wiped out due to dumping of cheap Chinese products, Pakistan has offered to eliminate duties only on half of the total product lines in the second phase of the free trade agreement (FTA) instead of 90% under the original plan.

 

Pakistan and China have also developed earlier differences on the tariff reduction modality. Pakistan based on the thorough data analysis and extensive stakeholders’ consultations, the exclusion percentage of products of Pakistan have to be 20 percent of the total tariff lines.

However, China refused to subscribe to the version of Pakistan rather Beijing insisted that the exclusion percentage of tariff lines should be no more than 10 percent as per the consensus reached by both sides in the phase 1 of China Pakistan Free Trade agreement.