However, FTAs with China and Malaysia have ended up in widening the trade deficit. Pakistan’s imports grew rapidly than its exports to its partners.
Bilateral trade with Malaysia increased by 69 percent to $1.5 billion, but trade deficit widened by 48 percent across FY08 to FY14; however, “this can be attributed to heavy imports of palm oil which has consistently formed more than 60 percent of imports from Malaysia till 2013,” said the KCCI report.
Trade with China remained similar like Malaysia’s, where trade deficit widened by 112 percent to $3.33 billion from FTA implementation in FY07 to FY14, whereas bilateral trade grew by 262 percent to $8.7 billion.
Pakistan did not secure either duty free access or high concessions for a significant number of product lines in which it has revealed comparative advantage. Besides, it was not able to have included in the concessionary lists a substantial number of value-added items that Pakistan has export advantage in. This has resulted in Pakistan not being able to export to China in line with its full potential.
There is huge trade gap between the two countries. The Chinese export a high range of items to Pakistan ranging from basic raw materials to high tech items.
Those include electronics and machinery, iron and steel and their articles, chemicals, plastic items and polyester fibre amongst others. Most of these items are highly value-added, in finished form, and have higher dollar values.
Contrary to that, Pakistan’s exports to China belong to a limited set of categories, mostly having low value addition levels which resultantly are of low dollar value. These exports largely include items like cotton yarn, raw fish, leather, marble, fruits, sports goods, rice, raw hides, and vegetables. Of these items, cotton yarn alone accounted for 79 percent of exports in 2013 and 55 percent in 2014 which depicts Pakistan’s extremely high export dependence on a single raw, little value-added item.
Pakistan started to import in bulk quantities many products from China after the FTA was implemented in 2007, which include tires, tiles and ceramics, polyester staple fibre and synthetic yarn, electronic items, industrial chemicals, paper and boards amongst many others. These products found a competitive position in the Pakistan market only after tariffs were reduced on them.
With import of these items, “local industry is being hurt,” said Iftikhar Vohra.
Earlier this week, Chairman National Tariff Commission (NTC), M Abbas Raza, terming the FTA with China as a ‘very serious’ issue, said that FTA with any country should be based on reciprocal business conditions and be mutually advantageous for both the countries, while the individual needs of the industry should also be kept in mind prior to finalising an FTA.