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February 6, 2018

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Pakistan seeks unilateral market concession from China

ISLAMABAD: Pakistan has sought unilateral market concessions from China on cotton yarn, rice, nuts, plastic waste, leather, nuts edible fresh or dried, trousers, frozen fish and crabs on immediate basis before embarking on the second phase of China Pakistan Free Trade Agreement (CPFTA).

Pakistan’s high-powered delegation led by Federal Secretary Commerce Younas Dagha is going to participate in next round of talks for finalising 2nd phase of CPFTA scheduled to be held in Beijing on February 7 and 8.

In the upcoming round of parleys, Pakistan will make a request to consolidate all concessions awarded under the CPEC into a bilateral institutional mechanism, trade in services, agriculture zones, retain sovereign control over natural resources and agriculture produce, negotiate Voluntary Export Restraints (VERs) and exclude sensitive sectors from CPEC (minerals as done by Mexico in NAFTA).

A top official from Pakistan confided to The News on Monday that Islamabad had made a special request to Beijing to take remedial measures in the wake of eroded exports by granting concession on products before finalising revised FTA that could give boost to our exports on immediate basis.

Pakistan’s high-powered delegation, the sources said, would remind their counterparts in scheduled parleys that following the first phase of CPFTA with China, the country’s trade deficit increased from $2.9 billion to $12.66 billion over the last decade.

Pakistan’s imports from China increased from 18% to 28% of its global imports. Pakistan’s imports from China are 36% of Pakistan’s non-oil imports while China’s imports from Pakistan are 0.1% of the country’s global imports. Pakistan’s imports from China are greater than 50% of global imports in 44% tariff lines.

China’s exports to Pakistan increased from $4 billion in 2006-07 to $14.56 billion in 2016-17. Pakistan’s exports increased from $0.5 billion to $1.47 billion during the same period. The maximum decline is registered in textiles led by cotton yarn which contributed 59% of decline in total exports. In agriculture sector, oil-cake has registered the maximum decrease and contributed 9% of decline in total exports.

Following increase in investment-led imports Pakistan’s global trade deficit has increased to $30.9 billion in 2016-17. The CPEC and infrastructure investment related balance of payment (BOP) outflows for Pakistan are expected to rise in the next several years, peaking at about $3.5–$4.5 billion by FY 2024/25.

With an investment of $9.5 billion under CPEC in 2016-17, imports increased by $5.51 billion. If imports continue to rise in the same proportion with incoming CPEC investment, it is estimated to increase to $58.7 billion dollars in 2017-18.

“If exports stagnate, the trade deficit would increase from $30.9 billion in 2016-17 to over $40 billion in 2017-18”, said the official. There is urgent requirement for containing a balance of payments crisis which hinged upon strong export recovery to strength Pakistan’s external sector position and paving the way for meeting the upcoming requirement of debt payments.

The government, the top official said, had devised a strategy in the light of impact on domestic industry and China will be asked to liberalize to reduce tariff on 90% tariff lines, reduce sensitive list to 10% while retaining and deepening preferences. Pakistan will request for managed trade in sensitive sectors on the pattern of Brazil-Argentina Auto Pact and linking tariff liberalization with investment of Pakistan Auto Policy 2016-21.

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