Pakistans’ Preferential Access to Chinese Market

Pak-China

ISLAMABAD: Pakistan has urged China to revive preferential treatment to ‘Made in Pakistan’ under the second phase of the free trade agreement (FTA), a senior official told Dawn on Saturday.

Pakistan and China have held several rounds to revise the FTA which was implemented in July 2007.

“We are expecting that the treaty will be revised by end of the current year,” the official said.

China entered into several bilateral and regional FTAs, which blunt Pakistan’s edge in the biggest market in the world.

“We have told China that market access has been eroded as it awarded the same status to others,” the official said.

China charges 3.5 per cent duty on import of yarn from Pakistan under the FTA. However, now the same duty rate is applied on Indian yarn.

“We have urged China to make adjustments to revive Pakistan’s advantage,” the official added.

It has been proposed that the next phase of the FTA should be based on less than equal reciprocity principle in favour of Pakistan.

It was further proposed that duties on 90pc of the total tariff lines may be reduced to zero immediately for Pakistani products.

The Ministry of Commerce may be allowed to have special provisions for protecting local industries, another proposal stated.

The China-Pakistan FTA on trade in goods was signed on November 24, 2006 and implemented from July 1, 2007.

The FTA on Trade in Services was signed on February 21, 2009 and became operational from October 10, 2009.

The bilateral trade volume was $4 billion in the year 2006-07 and reached an all-time high of $10.19bn in 2013-14. Pakistan’s exports have jumped to $2.4bn in 2013-14 from $575 million in 2006-07.

Correspondingly, China’s exports to Pakistan have increased to $7.77bn in 2013-14 from $3.5bn in 2006-07.

According to a commerce ministry report, during the first three years of implementation of Phase-I, both sides reduced tariffs on almost 36pc tariff lines to zero duty.

Phase II was supposed to start from the sixth year of the entry into force of the agreement and by the end of this phase both sides would have to reduce tariffs on 90pc tariff lines to zero per cent duty. The FTA covers more than 7000 tariff lines at HS Code 8 digit level.

Review of the first phase of the FTA has revealed that Pakistan could not utilise the concessions granted by China, Pakistan could only export in 253 tariff lines, where average export value was $500 or more, which is around 3.3pc of the total tariff lines (7550) on which China granted concessions to Pakistan.

Pakistan mainly exports raw materials and intermediate products such as cotton yarn, woven fabric, grey fabric etc. Value added products were missing. Some of the value added products like garments are included in the concessionary regime.

Pakistan’s major exports to China include cotton yarn/fabric, rice, raw hides and skins, crude vegetable material, chemical material, fish and fish preparations and crude minerals, etc.

Major imports from China are machinery (all sorts) and its parts, manufactured fertiliser, chemical element, yarn and thread of synthetic fiber, iron and steels, chemical material and product, vegetable and synthetic textile fiber, road vehicles and parts, non-ferrous metals, tyres and tubes of rubber etc.

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