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September 15, 2017

Pakistan, China FTA talks begin; trade imbalance in focus


September 15, 2017

ISLAMABAD: Pakistan and China on Thursday started talks to review free trade agreement, focusing on growing trade imbalances between the two neighboring countries.

Secretary Commerce Younus Dagha stressed the need to address balance of trade between the countries and visa issues faced by Pakistani businessmen during the eighth round of FTA’s second phase to review tariff lines and concessions. “The benefits of CPEC (China-Pakistan Economic Corridor) and CPFTA (China-Pakistan free trade agreement) shall be shared equitably by the two countries and should be a win-win proposition for both sides,” Dagha said in a statement. 

China is the biggest trading partner of Pakistan with annual bilateral trade volume standing at $12.2 billion. The bilateral trade, however, heavily tilts in China’s favour. Pakistan imported $10.53 billion of goods and services from China during the last fiscal year, while its exports amounted to $1.62 billion, the State Bank of Pakistan’s data showed.  The country, which recorded a decade-high growth of 5.2 percent during the last fiscal year, endured a trade deficit of more than $20 billion.  China charges 3.5 percent duty on the import of yarn from Pakistan under the FTA while it also applies the similar duty on imports from India with which it has signed no accord. 

The second phase was to be implemented from January 2014 after the bilateral negotiation for the review started in 2011.  The first phase of CPFTA was signed in 2006 and became operational in the following year.  Major areas under discussion during the 8th CPFTA include trade in goods and services and investment opportunities. 

Wang Shouwen, vice minister of Chinese ministry of commerce expressed his desire to further strengthen economic and trade cooperation between the two countries.  “After the conclusion and implementation of CPFTA, Pakistan will be able to expand its exports to China as the domestic consumption demand of China, with a population of 1.3 billion, is expanding exponentially,” Shouwen said.

The present FTA covers more than 7,000 tariff lines at eight-digit tariff code under the harmonised system.  A ministry of commerce report said Pakistan could not utilise the concessions granted by China under the first phase. It only exported in 253 tariff lines, where the average export value was $500 or more, which was around 3.3pc of the total tariff lines (7,550) on which China granted concessions to Pakistan. Pakistan’s key exports to China are raw material and intermediate products, such as cotton yarn, woven fabric and grey fabric. Value-added products are missing despite the fact that some of these products, like garments, are included in the concessionary regime.

Currently, Pakistan has reduced the duty on 35 percent products to zero percent while China has reciprocated by reducing the duty on 40 percent products of Pakistan’s exports to zero percent.

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