EU believes policies skewed to favour Chinese companies

The European Union (EU) has reportedly raised concerns on status to "Chinese" companies vis-à-vis European companies which intend to participate in different projects, well-informed sources told Business Recorder.
The EU conveyed such concerns during the 10th session of EU-Pakistan sub-group on trade held on November 13, 2019 in Brussels, but Commerce Ministry shared these concerns at a recent Inter-Ministerial Meeting (IMM) organized to prepare the strategy prior to the visit of an EU delegation next month.
The meeting presided over by Additional Secretary (Trade Diplomacy) Capt Javed Akbar Bhati (retd) decided to request PPRA to provide comments with regards to EU observations regarding "discrimination" in favour of Chinese companies. The purpose of the meeting was to discuss the trade irritants/ concerns highlighted in the 10th Session relating primarily to market access and sanitary & phytosanitory issues pending since long and to chalk out a way forward for the resolution of these irritants.
Earlier, the United States had also raised similar concerns which were rejected both by Pakistan and the Chinese government. The meeting was informed that the EU is a key trading partner of Pakistan especially with the ongoing preferential treatment given to Pakistani exports to the EU with its GSP + status, which will retire on December 31, 2023 and will be followed by another regime of enhanced trade preferential package.
DG (Trade Policy), MoC, Waqas Azeem informed the meeting that there is no restriction on export of hides and skins, however there is 20% regulatory duty. The duty was imposed to address the concerns of the leather garment associations for continued supply to local industry. Furthermore, it was stated that Pakistani leather prices have gone down and hence regulatory duty should not be an issue and this must be highlighted to the EU. In halal market, leather is an important product worldwide, however the prices of Pakistani leather is very cheap compared to other countries. DG (TP) revealed that the issue is that of halal certifications. The representative of PNAC said that a request from Commerce Ministry may be made to the certification bodies so that the same can be developed to capture the market.
Trade Policy (TP) Wing will request the National Tariff Commission to calculate the revenue collected from this duty and to carry out an impact analysis for reducing the duty by 5-10%. Simultaneously, TDAP will carry out consultations with the local stakeholders to resolve the issue. A comparison may also be carried out with other countries exporting leather to review whether they have also imposed such duties.
DG (TP) reiterated that while there was no restriction on export of molasses, there was a 15% regulatory duty to ensure uninterrupted and cheap supply to downstream domestic industry including, food, beverage, animal feed and biofuel industry. The meeting decided that consultation with stakeholders will be carried out and the quantum of revenue loss, along with analysis to be carried out if the duty is reduced and how it will impact the local industry will be calculated.
The representative of FBR said that it was a one-time imposed duty and has not been extended in the new budget. DG (TP) said the government is carrying out tariff rationalization and cascading, and as a result, 1600 + tariff lines have been brought to zero. The decision was that FBR would provide a detailed briefing and the country's position will be conveyed to the EU and they will be requested to drop the issue.
Regarding certification requirements for leather products DG, TDAP said that leather garment associations are agitating about the increased cost due to the certification requirement. He explained that there are two processes involved. Firstly, the physical and chemical test - for which the infrastructure is already developed and SGS, PCSIR (leather centre), etc. are carrying out these tests - and secondly, notifying is undertaken by a notifying body. He added that there is no notifying body in Pakistan and the issue needs to be taken up with the EU for establishment of the same in Pakistan. It was decided that the representative of DRAP would inform the EU that in compliance with the Supreme Court's order since 2018 price increase has been allowed twice. In line with the 2015 policy reduction in price prompted a company to challenge it in Court, the company in question being Sanofi.
DG (TP) said that Regulatory Duty on powder milk was imposed to protect the local dairy industry however the same is being reviewed in consultations with stakeholders.
The representative of MoNFS&R stated their Ministry is in favour of maintaining the existing 47% duty on powder milk to protect the domestic industry as milk powder imports are misused. He further posited that in winters production increases and demand decreases and companies like Nestle are being persuaded to buy milk from the farmer at the same price as in summer and convert it into powder and use the same in summer to make milk. Furthermore, a Dutch company, Friesland Campina Pakistan BV (FC Pakistan), has invested $446 million in Engro Pakistan. Engro recently established a dry milk plant in Sahiwal and hence it is important to protect such investment.
On the issue of profit repatriation, the SBP representatives said that there are no hurdles and no complaints have been received. With regards to imposition of cash margins, they said that it was done to ease the balance of payment issues faced by Pakistan and are non-discriminatory. They further stated that SBP is doing a review process, as a concern has been raised by many quarters, including the IMF. Removal of cash margins on raw materials of the manufacturing industry of some products will be done. AS (TD) stated that this is a positive development and may be conveyed to EU. The meeting decided that SBP should provide a detailed brief on the current position, including the progress under review process.
DG (TP) and representative of MoNFS&R said that the draft legislation, bringing it in line with OIE guidelines, has been improved through consultations. Recommendations of the poultry sector have been included.
Representative of Marine Fisheries Department (MFD) said that with regards to inviting the EU inspection team to Pakistan, the Karachi Fish Harbour is currently undergoing renovation which is expected to be completed by June 2020. She further said that MD, Karachi Fish Harbour Authority has indicated that they will be able to host EU delegation by the end of this year. AS (TD) highlighted the potential of seafood exports to reach 600 to 700 million Euros and conveyed that the issue needs to be resolved at the earliest. A discussion was also carried out with regards to upgrading the auction halls through EDF funding, which are currently in a dilapidated condition. Alternatively, it was discussed that through e-marketing, the role of auction halls can altogether be eliminated whereby the catch can directly go to the processing units and an arrangement can be developed with the provincial government on sharing the revenue from catch proceeds.
The meeting decided to arrange a joint visit to the Karachi Fish Harbour to be organized by Advisor to PM on Commerce, Minister of Maritime Affairs, Secretary TDAP, Representative of Government of Sindh and AS (TD). A separate meeting of all the stakeholders will be called to resolve the issue.
The representative of MolP stated that the issue has arisen due to an SRO, for duty on local parts. This separate regulatory notification gives the feeling that discrimination is being carried out on local and non-local parts, however, it is not so. The representative of MolP proposed to do away with the said SRO and transpose it with the first schedule. Resultantly, this will become part of the tariff structure. Alternatively, he informed that the policy period will end in June 2021 and with it, the distinction between local and non-local duty will also end. He further stated that the policy is being reviewed.