‘Non-tariff barriers creating hurdles in exports’: Country failing to derive desired gains from trade accord with China?

KARACHI: Pakistan has failed to capture even five percent of the market share from the 313 high-priority tariff lines offered by China under the second phase of the China Pakistan Free Trade Agreement (CPFTA-II).

The CPFTA-II has been operational since January 1, 2020, but Pakistan has not been able to secure its export interests as trade deficit is widening, and the country’s dependence on China is increasing alarmingly.

The country hardly managed to post an export figure of $3 billion against a whopping $20 billion imports from China in the Financial Year 2022.

The Trade Development Authority of Pakistan (TDAP) - the country’s sole export promotion body — still seems unable to figure out the areas in which renegotiations are necessary to resolve impediments affecting Pakistan’s exports to the neighbouring country.

Talking to Business Recorder on Thursday on the sidelines of the ‘Conference on Impact of CP-FTA on Bilateral Trade and Investment’, TDAP’s Chief Executive Arif Ahmad Khan confirmed that Pakistan posted export figure of $3 billion against $20 billion imports from China in FY-22. “Thirty-five percent of our trade deficit is directly linked to the trade with China,” he said.

“If we give more concessions to China for their exports to Pakistan, and our imports keep on increasing it really does not make any sense,” said Arif Khan.

The conference was jointly organised by the TDAP, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and the China Study Centre, Institute of Business Administration, at a hotel.

The TDAP’s chief executive officer pointed out that the country has been able to use all tariff lines so far, while non-tariff barriers are creating hurdles in smooth exports to China. “These non-tariff barriers can be removed through political and diplomatic deliberations,” he said.

He acknowledged that some of the Pakistani products have standard and quality-related issues as well. “For example, there are complaints that our chillies have aflatoxin contamination. This is not a tariff-related issue but a product quality matter. So we have to make them [the Chinese] agree that they should negotiate with Pakistan on the level of aflatoxin.

“Similarly, they have fixed quotas on rice imports, which is another non-tariff barrier. As long as the rice quota is not increased, we can’t enhance exports of the commodity under the CP-FTA.”

In response to a question about efforts to resolve non-tariff barriers on the part of TDAP, he said meetings are being conducted on a regular basis. Pakistan has representatives in Shanghai and Beijing, in addition to an ambassador.

“Principally, FTAs are meant to benefit both countries, and yes Pakistan has benefited from FTA with China. However, we have to make efforts to reduce hurdles,” Arif Khan said.

Amir Siddiqui, an economist at the Applied Economics Research Centre, University of Karachi, told Business Recorder that Pakistan has a narrow product line instead of a diversified one, and services. The country has exported copper worth around $800 million to China in one year. The other items are textile and leather products.

He said the more alarming thing is that our dependence on China for the import of raw materials is increasing. In his speech during the conference, FPCCI President Irfan Iqbal Shaikh said bilateral trade has increased significantly after the implementation of CPFTA-II.

However, Pakistani markets have been flooded with Chinese goods, leading to the closure of many cottage industries. The influx of cheap imports from China might have some adverse effects on the domestic manufacturing sector.

Circumstantial evidence suggests that a number of small-scale manufacturing units have been affected by low-cost imports from China. The local industry is losing ground in the domestic market.

On Jan 10, 2020, Joint Secretary (Foreign Trade-1) of Ministry of Commerce Dr M. Hamid Ali in his presentation at a seminar on CPFTA-II had said: “If we captured only five percent market share out of the 313 tariff lines, our exports would surge up to $3.2 billion and these projections are based on Chinese global imports in 2016.”

He was of the view that CPFTA-II has greatly secured Pakistan’s export interest as around 83 percent of the country’s global exports have been liberalised in the CPFTA-II as against 41 percent of the same in Phase-I.

Similarly, 91 percent of Pakistan’s exports to China have been liberalised in Phase-II as against 30 percent liberalised in Phase-I. This liberalisation covers 88.3 percent of China’s global imports or $1.6 trillion.

Joint Secretary of Ministry of Commerce Asmat Nawaz, TDAP Secretary Ahsan Ali Mangi, and chairman of the FPCCI’s Policy Advisory Board Mohammad Younus Dagha were among those who attended the event.

An MoU was also signed on the occasion between the TDAP and Policy Advisory Board of the FPCCI on research collaboration.

Copyright Business Recorder, 2022