Pakistan Seeks Unilateral Market Concession From China

Trade & Policy

Pakistan Seeks Unilateral Market Concession From China

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 participated in the next round of talks for finalising the second phase of CPFTA held in Beijing on February 7 and 8.

Pakistan made 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).

Pakistan's high-powered delegation reminded their counterparts that following the first phase of CPFTA with China, the country's trade deficit increased from US$ 2.9 billion to US$ 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 US$ 4 billion in 2006-07 to US$ 14.56 billion in 2016-17. Pakistan's exports increased from US$ 0.5 billion to US$ 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.

Following increase in investment-led imports Pakistan's global trade deficit has increased to US$ 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 US$ 3.5-4.5 billion by FY 2024/25.

With an investment of US$ 9.5 billion under CPEC in 2016-17, imports increased by US$ 5.51 billion. If imports continue to rise in the same proportion with incoming CPEC investment, it is estimated to increase to US$ 58.7 billion dollars in 2017-18. "If exports stagnate, the trade deficit would increase from US$ 30.9 billion in 2016-17 to over US$ 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 liberalise to reduce tariff on 90% tariff lines, reduce sensitive list 10% while retaining & deepening preferences. Pakistan will request for managed trade in sensitive sectors on pattern of Brazil-Argentina Auto Pact and linking tariff liberalization with investment of Pakistan Auto Policy 2016-21.