A summary has been sent to the cabinet meeting to be convened on Wednesday for approval, said an official source.—PPI

ISLAMABAD: Pakistan has formally decided to trim 233 tariff lines from the sensitive list under South Asia Free Trade Agreement (Safta) and make 20 per cent reduction in customs duty on imports of these items to further liberalise its trading regime with her neighbouring countries, it is learnt.

But the country's top tax machinery, Federal Board of Revenue has raised objections over 32 tariff lines of the total 233 on the plea that any reduction in customs duty on these products could lead to revenue loss.

The products placed in the sensitive list under Safta are allowed for trade but could not be considered for reduction in customs duties. But the withdrawal of these items from the sensitive list means that Pakistan would also now notify 20 per cent reduction in customs duties for all Safta member countries.

“We have sent a summary to the cabinet meeting to be convened on Wednesday for approval,” an official source in the commerce ministry told Dawn on Monday. The ministry has also sent the summary of the FBR, who have raised serious reservations that reduction in customs duty could lead to duty reduction.

“Now the issue will have to be decided by the cabinet meeting headed by Prime Minister Yousuf Raza Gilani,” the official added.

The cabinet meeting crowded by non-technical ministers will hardly support the FBR views, which in a view support protectionism for local industry. But the powerful technical team headed by Finance Minister Hafeez Sheikh will support commerce ministry view to open up border for imports and do away with the restrictive regime.

The government, however, has no options as commerce ministry had made a commitment in the Safta Ministerial Council meeting held in Maldives in June 2011 to make a drastic reduction in sensitive list much ahead of November 1. Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka are members of this treaty.

After removal of 233 tariff lines, Pakistan still will have 936 tariff lines in the sensitive list.

Safta was effective from July 1, 2006. As of August 2010 the total exports by member countries under Safta reached to around $1.3 billion.

At the time of signing the treaty Pakistan's total exports to Saarc countries stood at $0.055 million in 2006, which now rose to $56.119 million in the year 2010. Some progress has been witnessed but it still remained far behind the potential.

Contrary to Pakistan, the Indian exports in the year 2007 was $3.783 million, which now edged up to $276.933 million in 2010 making it the leading member of the regional block to have got maximum benefits from the treaty. Bangladesh was the second after India, which increased its exports under Safta to $236.711 in 2010 from $15.273 million in the year 2007.

As per trade liberalisation programme under Safta, the Non-LDCs (Sri Lanka, India and Pakistan) would reduce their tariff to 0-5 per cent by 2013, whereas the LDCs would reduce tariff to 0-5 per cent by 2016.

This reduction, according to the experts would greatly divert the global trade towards South Asia in the years ahead. However, this depends on the commitment of the member countries to also do away with the long list of non-tariff barriers (NTBs) that restricts trade flows among the member countries.