ISLAMABAD: Japan is reportedly unhappy with Pakistan for extending zero tariffs on textile and other machinery imported from China under the Free Trade Agreement (FTA), well informed sources told Business Recorder. "Pakistan has provided market access to China for import of textile and other machinery at zero tariff under the FTA, which has impacted on Japan's market share in Pakistan," the sources added.
The issue was recently discussed between Commerce Minister Makhdoom Amin Fahim and the Japanese ambassador to Pakistan. "Pakistan's market share of textiles in Japan is declining due to supply constraints and increased imports from China. Both countries can address the challenges of market access by negotiating a comprehensive trade agreement," the sources added.
Pakistan's major exports to Japan are aviation fuel, cotton yarn, fabrics, seafood, leather garments, carpets and rugs whereas Islamabad imports auto parts, vehicles, textile machinery, telecom machinery, construction machinery and flat rolled products. Pakistan and Japan established diplomatic relations in 1952. Since then both countries have enjoyed friendly and cordial relations. In 1960 both countries mutually granted most favoured treatment on trade and entry of nationals. In the economic field, Japan continues to be a major trade partner of Pakistan. In the development co-operation field, Japan has contributed to the economic development of Pakistan as a major bilateral development co-operation partner.
In early 50s Pakistan assisted Japan overcome foods shortages by exporting rice to Japan. The trade pattern of export of raw cotton from Pakistan and subsequent import of yarn and fabric from Japan shifted in 70s when Japan began to export spinning machinery to Pakistan. During this time the Japanese textile machinery manufacturers also entered into buy back arrangements from Pakistani textile manufacturers. Consequently, Japan became the third largest textile market for Pakistan, after USA, and EU.
Bilateral and economic trade relations with Japan eroded after 1998 when Pakistan detonated the atomic device for which Japan has the greatest sensitivity as it is the only country in the world which was subjected to atomic bomb attack on its territory.
Relations between Japan and Pakistan began to improve after September 11 and yen loan was revived. In spite of repeated requests and the fact that Japan had started negotiations with India for a Free Trade Agreement, Japan government was not willing to initiate such negotiations with Pakistan. In the recent past, however, Japan agreed to formalise interaction of businessmen of both countries.
Pakistan-Japan Business Forum was launched in February 2001. The aim of the Forum is to encourage, further and promote mutual understanding and friendly relationship amongst the business communities of both the countries. The Forum also provides channel of communication between businesses and the governments of both countries.
In the fourth meeting of the Forum held in Islamabad on January 23, 2007, Pakistan was able to convince Japan to initiate a Joint Study on Trade and Investment. The study was undertaken by a team of businessmen and Government officials of both countries. The Joint Study Group recommended to the Japanese government to explore the possibility of an FTA with Pakistan but Tokyo has shown little interest in FTA with Islamabad, said an analyst.