$5bn medium-term target eyed: Pakistan, Turkiye set to sign ‘trade in goods’ accord

ISLAMABAD: Pakistan and Turkiye are all set to sign the long-awaited agreement on trade in goods during the forthcoming visit of Turkish Minister for Trade within a couple of weeks, aimed at achieving strategic goal of bilateral trade of $5 billion in the medium-term, sources close to Commerce Minister told Business Recorder.

Sharing the details, sources said, to improve the economic and trade relations between Pakistan and Turkiye, both countries signed a “Framework Agreement for Establishing a Free Trade Area between Pakistan and the Turkiye” on March 22, 2016. In the agreement, both sides reflected their commitment to gradually establish the Turkiye-Pakistan Free Trade Area covering trade in goods.

With this aspiration, Pakistan had been engaged in intensive negotiations for a Trade in Goods Agreement with Turkiye, in consultation with public and private stakeholders in Pakistan. The Agreement on Trade in Goods would be an important break-through in improving economic relations between the two countries and was a key agenda point during the recent visit of Prime Minister, Shahbaz Sharif to Turkiye from May 31, 2022 to June 2, 2022.

After 14 rounds of bilateral negotiations, the agreement had been finalized for signing. The final draft of the agreement had been duly vetted by the Tariff Policy Board and the Ministry of Law and Justice.

The key highlights of the trade concessions offered by both sides under the Agreement were as follows: (i) Turkiye had offered concessions to Pakistan on 261 Tariff Lines, which include key items of Pakistan’s export interest to Turkiye from both agriculture and the industrial sectors. Concessions on these items would provide Pakistan’s exporters better market access compared to competitors such as India, China, Vietnam, and Malaysia. Out of these 261 Tariff Lines, the Turkish side was offering immediate zero concessions in around 123 Tariff Lines (Customs Duty for Agriculture Products and Additional Customs Duty for Industrial Products), whereas, in 92 Tariff Lines, duty would be reduced to zero in 5 to 10 years. In 5 Tariff Lines, the Turkish side was offering 50 percent reduction, whereas, in 14 Tariff Lines, it was offering a Tariff Rate Quota; and (ii) Pakistan had offered the Turkish side concessions in 130 Tariff Lines. Out of 130 Tariff Lines, Pakistan was offering immediate zero duty to Turkiye in only 16 Tariff Lines, whereas, in 16 Tariff Lines, Pakistan was offering zero duty in 5 to 10 years. In the remaining Tariff Lines, Pakistan was only offering a Margin of Preference to Turkiye ranging from 20% to 50%. It is important to note that the Turkish Request List was for 300 items, however, Pakistan had kept 170 items in the sensitive list to protect domestic industry.

The bilateral trade between the two countries had been consistently increasing over the years, and stands at $ 882 million as of FY 2021-22, up by 17.8 per cent from $ 749.12 million in FY 2020-21. Pakistan’s exports to Turkiye had seen an increase of 33.6 per cent, from $ 273.58 million in FY 2020-21 to $ 365.6 million in FY 2021-22.

During the visit of Prime Minister of Pakistan to Turkiye (May 31, 2022 to June 2, 2022), the Minister for Commerce of Pakistan and Minister for Trade of Turkiye signed a Joint Ministerial Statement on “Developing Bilateral Trade and Economic Relations between the two countries”, whereby, both sides expressed the resolve to work for increasing bilateral trade to $ 5 billion in three years, as well as, to expeditiously conclude the Trade in Goods Agreement on the basis of mutual benefit.

As also agreed by both sides during the visit, the trade in goods agreement would be signed during the forthcoming visit of Turkish Minister for Trade to Pakistan, which was scheduled to take place in the next few weeks.

According to sources text of the agreement included comprehensive provisions on bilateral safeguards, balance of payment exceptions, Dispute Settlement, and Periodic Review of the agreement, duly vetted by Law and Justice Division. The component of tariff reduction modality was approved by the Tariff Policy Board. Rules of Origin incorporated in the Agreement were similar to EU and Pakistan is already complying with EU’s Rules of Origin under GSP+ regime.

Turkiye’s offer to Pakistan, indicating products with enhanced market access were also shared in detail. Similarly, Pakistan’s offered concessions to Turkiye were also highlighted for the Cabinet. The Ministry of Commerce noted that the Trade in Goods Agreement will be followed by deeper market access in services and investment. The Agreement will also help in achieving the strategic goal of bilateral trade of $5 billion in the medium-term.

Copyright Business Recorder, 2022