Exports to China hold $3.3 billion potential

KARACHI: Pakistan Business Council, a leading business advocacy group, proposed the government to seek zero-tariff access for 25 products, mainly rice and garments, from China in any revised trade agreement to add over three billion dollars in annual exports revenue.

“In response to an urgent request from the Secretary Commerce late last week, Pakistan Business Council (PBC) has provided a list of items with a theoretical export potential of $3.3 billion, for which Pakistan needs to secure zero-tariff access in the renegotiation of the FTA (free trade agreement) with China,” Ehsan Malik, chief executive officer at PBC said on Tuesday.

The council represents more than 65 largest private sector’s enterprises, including multinational corporations, in Pakistan.

The proposal coincides with negotiation of phase-II of FTA between China and Pakistan.

Industry analysts pointed out multiple flaws in the existing bilateral trade accord, signed a decade ago, that skewed benefits mostly in favour of China, which in the past couple of years made greater inroads into its neighbouring Pakistan through multibillion dollars in infrastructure investments.

Following the FTA, an estimate said Pakistan’s trade deficit with China markedly widened, surging from $2.9 billion in 2006/07 to $12.7 billion in 2016/17 – an overwhelming figure in view of Pakistan’s minuscule exports of $22 billion.

The PBC’s estimates showed that exports of semi-milled or wholly-milled rice (polished or glazed) to China could earn $1.14 billion on zero-tariff market access in addition to the current $193 million.

This would be apart from broken rice that possesses an additional export potential of $190 million. China imported over $1.34 billion of rice from the world in 2016, while Pakistan’s total rice exports stood at $1.42 billion.

Likewise, China’s global imports of single cotton yarn amounted to $2.14 billion.

Pakistan exported $811 million of single cotton yarn (containing around 85 percent cotton) to the world and $670 million to China.

The export could increase $141 million. Exports of boys’ trousers, breeches, cotton t-shirts and knitted or crocheted vests could fetch $339 million in addition to $544 million.

Other products that hold potential for extra exports in zero-tariff regime include girls’ trousers, grain splits leather, t-shirts, paper and paper board, footwear, vegetable fats and oil and household articles. These products earned the country $946 million in 2016.

Pakistan and China had agreed to revise the FTA by the December-end 2015, but Chinese authorities were unwilling to accept Pakistan’s demand to revive preferential treatment for exportable products under the FTA’s second phase, which was to be implemented from January 1, 2014.

Local businesses, time and again, have expressed concerns over insufficient utilisation of concessions given by China to Pakistan and competition faced by the local industries due to cheap imports from China.

Pakistan could not use the concessions granted by China under the first phase, as it only exported 253 tariff lines and an 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 materials and intermediate products, such as cotton yarn, woven fabric and grey fabric.

Value-added products were missing despite the fact that the country’s key exportable garments were also included in the concessionary regime.