Pakistan and China are holding a two-day (April 9-10, 2019) parleys in Beijing to finalise second phase of China Pakistan Free Trade Agreement (CPFTA), which is expected to attract criticism from domestic industry, well-informed sources told Business Recorder. Pakistani team comprises Secretary, Commerce, Sardar Ahmad Nawaz Sukhera, Secretary Finance, Younus Dagha (who negotiated at least three or four rounds as Secretary Commerce) and other officials from Commerce Division, Federal Board of Revenue (FBR), Ministry of Industries and Production and Textile Division.
The sources said both sides will finalise the CPFTA-II during the 11th round and the long negotiated pact is expected to be signed during the visit of Prime Minister, Imran Khan in the last week of current month. Chinese ambassador to Pakistan, in a letter to the Prime Minister has stated that Chinese President XI Jinping and Prime Minister Li Keqiang are looking forward to his visit to China as a guest of honour in the second Belt & Road Forum in late April.
"Prime Minister Imran Khan's able leadership is bringing changes to Pakistan and the Chinese business community is very much encouraged to establish joint ventures with local partners. Such policies like the ease of doing business, pro-investment initiatives and taxation restructuring will greatly help promote investment," he added. China has already provided market access to Pakistan in sugar, rice and yarn amounting to $ 1 billion. However, Pakistan has sought market access in wheat, potato, onion and cherry to the tune of $ 1 billion.
On overall liberalization level, China has offered exemption on 75 per cent tariff lines, 67 percent in trade value in addition to Margin of Preference (MoP) at 5 per cent. Current offer in Tariff Exemption stands at 74.2 per cent in tariff lines, 67.8 percent in Trade Value (TV) and Preference of 5.2 per cent in tariff lines.
The sources said the market access of trade in goods as final offer by Pakistan has been divided into three categories. Category 1- Entry Into Force (EIF) will be on 45 percent tariff lines. The EIF in Category 2 will be on 15 per cent tariff lines to be implemented in 7 years. Category 3 which will comprise 15 percent in tariff lines will be implemented in 15 years. Pakistan's current offer-(C1) Entry Into Force is 44.5 percent in tariff lines, C2- 14.9 per cent in tariff lines and C3 is 14.7 percent in tariff lines in 15 years.
Starting year of tariff concession for C2 and C3, China's offer for EIF( year-1) and C3, year 3. However, Pakistan wants C2 EIF in year 2 and C3- year 3. China's final offer on overall liberalization level is as follows: (i) Trade Exemption- 75 percent in tariff line and 90 per cent in trade value and preference of 5 percent in tariff lines. Current offer- Trade Exemption 75 percent in tariff lines, 90.3 percent in trade value and preference of 5 per cent in tariff lines.
According to sources, replacement of certain tariff lines from the current offer if new tariff lines are to be included in the final offer. The tariff lines to be removed from the current offer shall not be from Pakistan's 1059 tariff lines list and 651 tariff lines list.
The sources further stated that 57 tariff lines from Pakistan's 313 tariff lines prioritized request list. EIF on 8 agriculture tariff lines is excluded. The sources said 256 tariff lines from Pakistan's 313 tariff lines prioritized request list EIF, China will make best efforts to accommodate the tariff lines on which China has offered zero duty to the ASEAN. However, the remaining tariff lines (not included in the 313 list) from Pakistan's 1059 tariff lines request list, China will maintain its current offer on the remaining tariff lines.
Pakistan is still insisting on Clawback on five tariff lines i.e. bus truck tyres, glass, steel bars and rods, mobiles and led Lights, but China is not agreed.
On Electronic Data Exchange between Customs, both sides have agreed to implement the MoU in true spirit. Both sides will ensure implementation of the existing MoU on electronic data exchange which was signed on November 3, 2018 and endeavor to take further steps including a suitable mechanism to address the concern on export price information.
FPCCI President, Daroo Khan maintains that Pakistan may enter into second phase of FTA with China but not at the cost of closing down our local industries and adversely affecting the economy at large. He further stated that in the first phase, trade deficit with China has increased to $ 17 billion. President FPCCI added that Pakistan has already liberalized 60% of its trade with China, suggesting that Ministry of Commerce takes policy reforms to eliminate under-invoicing and settles an agreement with China on removal of Sanitary and phytosanitary measures (SPS), Technical Barriers to Trade (TBT) and barriers other than tariffs.
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