November 26, 2006	Sunday	Ziqa'ad 4, 1427

ISLAMABAD, Nov 25: Pakistan and China have agreed to implement the first phase of customs duty reduction from July 1, 2007 under the Free Trade Agreement (FTA), says a senior official of the commerce ministry.

Pakistan is the second country after Chile to have signed a bilateral arrangement on trade and investment with China. The five years tariff predictability would provide a level-playing field to Chinese investors for making investment in various sectors in Pakistan.

Talking to Dawn on Saturday Commerce Secretary Syed Asif Shah said the agreement carried safeguard measures for protection of local industries in both countries as and when required.

He said the measures were introduced at bilateral level for restricting the imports of certain commodities causing harm to local industries. He said that this arrangement would be WTO plus.

In the textile sector, he said cotton yarn was subject to 5 per cent duty, which would remain the same in the first phase of the agreement. However, the duty on textile and garments, which was 25 per cent, would be reduced to 20 per cent in five years.

Polyester sector including fabrics and garments have been put in negative list and no duty reduction would take place in the first five years. He was confident that all the lists were finalised in consultation with all stakeholders including all chambers.

In the engineering and auto sector, the secretary said that the prime quality goods were subject to 10pc duty, which would be reduced to 5pc in five years and goods of secondary quality subject to 20pc duty and would be reduced to 16pc in five years.

Vehicles in CBU, SKD and CKD condition and auto parts classified in any of the headings of Pakistan Customs Tariff have been protected and no duty reduction has been undertaken during the first five years, he said and added all domestic appliances had either been completely protected or the duty would be reduced from 25 to 20pc and then to 16pc in five years.

Other sectors protected from tariff reductions include food basket, edible oils, cigarettes, locally manufactured in organic and organic chemicals, large number of plastic products, edible products, paper and paper board, engineering goods attracting high tariff of duty and domestic appliances.

Joint Secretary Commerce Shahid Bashir, who led the Pakistan side from first round to concluding round, told Dawn that negotiations on the services part of the agreement would start in March 2007.

He said that under the customs rules of origin 40 per cent value addition was necessary for availing the duty concession. However, he said that product specific valuation percentage would be worked out before the implementation of the first phase of the agreement.

He said under the agreement an FTA Commission would be established to be headed by Pakistan’s Commerce Secretary and Chinese Vice Commerce Minister to review the implementation of the agreement after six months. The Bilateral Investment Treaty (BIT) was now made part of the agreement which would provide a define mechanism for dispute resolution besides other issues.

Mr Bashir said that the banned items would also remain restricted under the FTA with China.