Pak-China disapprove of trade concessions in FTA II

In the seventh round of meeting held by Pakistan and China on trade concessions, after the stalemate of one year over reaching an agreement on the revival of preferential tariff on exportable products for each other, both the nations are reluctant to give specific concessions to each other in the Free Trade Agreement II.

Pakistan’s major exports to China remained rice, cotton yarn, woven fabric, grey fabric while import were electronics, stainless steel items, polyester, yarn, fabric and tires in 2015. The FTA covers more than 6700 tariff lines at 8-digit tariff code under Harmonised System (HS).

Pakistan and China signed an FTA in November 2006. Pakistan offered tariff concession and elimination on 6711 products while China did the same in 6418 products over a period of five year. Phase 1 of the FTA ended in December 2012, phase 11 negotiating started in July 2013 aiming to eliminate tariffs on at least 90 percent of all products Since then, both sides had held six meetings but failed to develop an understanding on preferential concessions to each other. The last meeting on the second phase negotiations was held in October 2015 in Beijing.

During the meeting, Pakistan shared its concerns regarding insufficient utilisation of concession given by China to Pakistan and competition faced by the local industries due to cheap imports from China.

The Pakistan Business Council (PBC) in its report showed huge discrepancies in both countries trade volume. The report shows that Pakistan has a trade deficit of over $9 billion with China whereas Chinese data shows a trade deficit of over $14 billion indicating that in 2015 there is nearly $5 billion in trade that is unaccounted for that mean severe revenue losses and tax evasion are taking place.

A Pakistani official said that Pakistan has been demanding to revive the preferential tariff on exportable products under the second FTA II as it wants zero rated on 80 to 90 percent of products but China is unwilling to accept Islamabad’s demands. On the other hand, China also wants Islamabad to reduce zero percent on 80 to 90 percent products under the revised FTA.

The official also said that China has showed its willingness to address this concern. Electronic Data Interchange (EDI) centre will be formed in FBR and it will begin functioning in 2017 .After that the discrepancy will be minimized to lowest level.

Currently, Pakistan has reduced duty to zero percent on 35pc products, while China reciprocate it by reducing duties to zero per cent on 40pc products of Pakistan’s exports.