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Beyond CPEC

Published Dec 10, 2016 03:02am


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TWO initiatives currently under way provide an example of how Pakistan’s regional integration potential goes far beyond CPEC and needs to be pursued on multiple fronts simultaneously. One includes the talks centring on the renewal of the free trade agreement signed with China in 2007. The other is the move within the government about restarting talks with Iran on the import of natural gas through the pipeline project by seeking a renegotiation of the power purchase agreement (PPA). Both initiatives pull regional integration efforts in different directions, yet both remind us that there are multiple roads to integration, and placing all the emphasis on CPEC alone risks putting too many eggs in one basket.

The FTA with China is in bad need of overhaul. The original agreement of 2007 has had a severely negative impact on domestic industry and flooded the country with Chinese imports, even in agricultural produce. The trade deficit with China reached almost $4bn in 2013, and two years later, in 2015 it jumped to $9.1bn. Now both countries are negotiating the second round of trade liberalisation as envisioned in the original agreement, and whereas the Pakistani side has carried the views of domestic industry to the talks, reports indicate they are having a difficult time getting the Chinese to accept the reservations. The second round envisions the trade liberalisation level to reach 90pc, in terms of tariff reductions, but it is crucial that Pakistan keep the interests of domestic industry in mind when moving forward towards the third round of talks scheduled for March next year. It is important to keep in mind that this is a completely separate issue from CPEC, and the two should not be allowed to mix.

While applying the brakes on the runaway trade liberalisation with China, the government can do more to accelerate similar initiatives with Iran. Trade can begin with natural gas, especially by proceeding in earnest with the construction of the portion of the pipeline that lies within Pakistan. Renegotiating the PPA is fair given the changes in oil pricing, but such talks will appear to be stalling tactics if the hardware to purchase the gas is not being built. In time, the trade relationship with Iran can be expanded considerably to include other hydrocarbon resources as well, and regularise the imports of LPG. It is crucial to keep our focus when talking about regional integration, and not allow the entire project to be boxed under the CPEC label. Pakistan’s potential for regional integration is huge, and there are plenty of neighbours with whom there should be talks. If the present climate makes dialogue with India and Afghanistan difficult, then this is a moment to pursue talks with China and Iran with a view to meeting the needs of domestic industry.

Published in Dawn December 10th, 2016

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Comments (14) Closed

brr Dec 10, 2016 04:03am

It takes backbone to negotiate tariffs. The pakistani state bent over backwards to get CPEC started, and agreed to crazy interest rates. That does not bode well for any future negotiations. When China says "jump", pakistan always seems to say "how high".

Ash20 Dec 10, 2016 04:44am

Trade deficit with China is expected to be $13 billion in 2016 and $18 in 2017.

Mango man Dec 10, 2016 10:01am

What incentives do the Chinese have to concede to Pakistani domestic sector demands? I don't foresee much change in the new Sino-Pak FTA.

hnmirza Dec 10, 2016 11:00am

Excellent analysis. Excellent advice.

irum Dec 10, 2016 11:56am

It's the pattern of give and take....

Salam namaste Dec 10, 2016 11:59am

Why not reducing tension with India and Afghanistan is one of key parameters of solution ? There are huge opportunities of trade between India, Afghanistan and Pakistan which can help domestic industry of Pakistan. Decision is entirely yours

Iftikhar Bhutta Dec 10, 2016 01:56pm

Good analysis and advice

Asma Tanoli Dec 10, 2016 05:17pm

The problem is not FTA with China but the government failing to undertake any reforms. If the government had done some reforms, it would not have resulted in so much trade diversion.

SAchin Dec 10, 2016 06:25pm

Region from Kabul to Peshawar to Lahore to Amritsar to Delhi (British Punjab) should be made one economic integrated zone as it was for centuries. It will rival China or Hongkong or Singapore and bring immense peace and prosperity to the region.

Zak Dec 10, 2016 09:36pm

@brr shows you have not comprehended pakistani resolve.

Zak Dec 10, 2016 09:37pm

It's just a start. The best is yet to come.

gknatarajan Dec 10, 2016 11:30pm

you will not allow trade between india \afganisthan thro, your land . inspite of india extending most favoured nation to pakisthan for tarde pak. even as on date never reciprocated. but you keep on blaming india for all your ills . . some soul serach is required. glad that you have atlast echowed my view that china is very biased \ seifish negotiator reg. business. india has learnt it in hard way; now is insisting trade has to be both ways not just one way traffic! so make in india slogan statred by the present govt. making a start is better than doing nothing and loosing the game!

ashar Dec 11, 2016 02:55am

The sad demise of Pakistan Steel is one of the losses incurred to us due to the concessions given to Chinese products

RAhamad Dec 11, 2016 05:07am

Why not pass the gas to China through CPEC. Where there road we can put the pipeline. Certainly Pipeline movement will economical even comparing with sea route.