Federation of Pakistan Chambers of Commerce and Industry (FPCCI) and Commerce Division are said to have different viewpoints on the proposed FTA-II between Pakistan and China. Well-informed sources told Business Recorder that Federal Board of Revenue (FBR) has sided with local industry, saying that the current proposal being considered as a win-win for both countries is against Pakistan's interests.
On March 15, 2018, a meeting was held in Ministry of Commerce - Islamabad, under the chairmanship of Advisor to PM on Finance, Revenue & Economic Affairs Dr Miftah Ismail whereas Secretary Commerce Division Younus Dagha led Commerce's team. The private sector was represented by Ghazanfar Bilour President FPCCI Amir Waheed, President of Islamabad CCI, ZahidLatif Khan, President Rawalpindi CCI and others.
The meeting was informed that Pakistan will reduce Customs Duty to Zero% on 70% tariff lines and China will do the same for Pakistani goods.
The sources said, during the 9th round, both sides conducted intensive discussions on tariff reduction modality and key requested products; the divergence between two sides has narrowed. Both sides agreed that the outcome of the meeting will serve as the basis of future negotiations with a view to concluding the second phase of CPFTA in the near future.
According to sources, regarding 75% tariff lines offered by Pakistan, China requested Pakistan to include the majority of 1394 key products of China.
Both sides agreed that Trade in Services negotiations can be excluded in the second phase of CPFTA outcome. However, the two sides agreed to continue their discussion on Trade in Services separately after the second phase CPFTA (Trade in Goods) is concluded.
According to FPCCI, the Association's President and others demanded to place 70% tariff lines on website for study of all stakeholders, which was denied by Commerce Secretary. He offered to have another meeting in the next 10 days with the stakeholders where they can give the details of tariff lines to concerned sectors. The sources said Commerce Division's officials have started consultative process with the public and private sector afresh. Commerce Division is facing resistance from FBR and Ministry of Industries and Production on some of the proposals which they think will hurt local industry. FPCCI is concerned that FTA part-1 resulted in favour of China, with Chinese exports to Pakistan more than $ 15 billion against Pakistani exports to China of $1.5 billion last year.
Syed Mazhar Ali Nasir, Senior Vice President of FPCCI maintains that 2nd round of FTA will give more advantage to Chinese exporters and result in further closure of Pakistani Industries and increase unemployment.
He proposed that FTA imports be linked to Pakistani exports and China must meet 25% imports from Pakistan against their export value to our country, ie if China exports touch $ 20 billion, they must import $5b goods from Pakistan. Otherwise there is no benefit to the Pakistani economy with the current FTA or 2nd round of FTA.
While negotiating 2nd round of FTA, Pakistani existing industries must be protected as well as market gap for new potential local industry.
"We value China-Pakistan friendship, but we must protect the economic interest of Pakistan. If second round of FTA is implemented as at present, our import dependence will increase to 40-50% from China in the next 5 years," he said, proposing that finalization of second round of FTA be postponed till after elections. Unconfirmed reports suggest that the FTA-II talks which were expected to be held during the last week of current month have been postponed until Commerce Division completes its own homework.
The sources said, with regard to second phase the Secretary Commerce revealed that after strenuous negotiations and persistent efforts, following has been agreed: (i) China would immediately eliminate tariffs on Pakistan's 57 priority items; (ii) instead of the agreed 90% liberalization, 75% tariff lines would be liberalized thereby increasing room from 10% to 25% to protect local industry; (iii) 67% liberalization in terms of trade volume for Chinese exports and 90% for Pakistan's exports; (iv) revision of SGM provisions and inclusion of BOP clause proposed by Pakistan providing the best possible terms in comparison with various Chinese FTAs; and (v) both sides agreed to start sharing trade data information under EDE through Certificate of Origin but China needs to undertake legal changes in this regard.
He also revealed that the Ministry has already consulted the stake-holders in Government as well as in Industrial sector during November 2017 to February 2018.
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