A Chinese team headed by Vice Minister of Ministry of Commerce China, Wang Shouwen, is scheduled to reach Islamabad on Sunday (today). It will make every possible effort to finalize the second phase of China-Pakistan Free Trade Agreement (CPFTA-II) with Pakistan, well-informed sources told Business Recorder. Secretary Commerce Younus Dagha will lead Pakistani team comprising representatives of different Ministries/Divisions. However, Commerce Ministry is also trying to bring Commerce Minister Pervaiz Malik to head the Pakistani side during formal talks scheduled to be held on Monday (tomorrow). However, it is not clear if the Minister will agree to head the team.
The sources said Commerce Division has reportedly been "directed" from highest level to finalise the CPFTA-II during the 10th round so that the agreement is inked during the forthcoming visit of Prime Minister, Shahid Khaqan Abbassi to China.
FPCCI argues that CPFTA Part-1 was in favour of China, given their exports to Pakistan are more than $ 15 billion against Pakistani exports to China of $1.5 billion last year. However, Secretary Commerce, who recently spent a few days in Karachi to consult with the private sector on the proposed CPFTA-II, described the information about high-level intervention as false.
"We will negotiate in line with the input from exporters, industry, FBR, EDB and other stakeholders," he told Business Recorder. Federal Board of Revenue (FBR) which was opposing the CPFTA-II has reportedly changed its stance now after intervention from the top. According to sources, there is a possibility of informal talks at technical level between the two countries to narrow down divergence on the list.
Secretary Commerce stated that CPFTA-II will be negotiated in view of the input from local industry. In the last round of talks held on February 6-7, 2018 in Beijing, both sides conducted intensive discussions on tariff reduction modalities and key requested products, which led to narrowing of divergence between the two countries. Both the sides agreed that the outcome of the meeting will serve as the basis of future negotiations with a view to concluding the second phase CPFTA in the near future. Regarding 75 tariff lines offered by Pakistan, China requested Pakistan to include the majority of its 1394 key products.
According to the under consideration Tariff Reduction Modalities (TRM), 75 per cent tariff lines will be duty free whereas 20 per cent items will remain in negative list, the source said, adding that 5 per cent tariff lines will fall in Margin of Preference (MoP) mechanism. Insiders told Business Recorder that the Pakistani technical team is yet to firm up its negative list. The sources said tariff elimination on 75 percent tariff lines will constitute 67 percent trade value for Pakistan. This will be divided in three stages, ie, category 1: EIF, category II, 0-7 years, category III, 03-15 years.
China has not committed to eliminating duty on 57 items as was requested by Pakistan during the 9th round held in Beijing. Unconfirmed reports suggest that China has conveyed to Pakistan that they are not ready for claw-back on 5 items. However, they have agreed on Electronic Data Exchange (EDE) of 100 per cent of the items which will discourage under-invoicing.
In the last meeting, the two countries, after discussing the draft MoU on the Electronic Origin Data Exchange System between China Customs and Pakistan Customs, including related data exchange elements, agreed on the draft text of MoU. Both sides further agreed to coordinate on finalization of respective internal approval process for the MoU before the implementation of EODES on April 2, 2018. The sources said both sides are expected to finalise an agreement on Technical Barriers to Trade (TBT) during this round. The sources further stated that if both sides reached a consensus on CPFTA-II, the new agreements will be incorporated in the FTA-I signed in 2001.
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