KARACHI: The negotiations over a Free Trade Agreement with Turkey have hit an impasse after the seventh round was concluded early last month, and the secretary level talks have ended without a breakthrough. Hopes are now riding on the ministerial level talks, for which no date has yet been announced.

Talking to Dawn on Tuesday, sources said despite Pakistan’s generous favours including opening up the auto sector, Turkey has shown reluctance to reduce duties on textile products, an important demand from Pakistan.

Spokesperson and Direc­tor Ministry of Textile Kanwar Usman said the Turk side offered 20 per cent margin of preference on tariff lines of Pakistan’s interest, with majority of these for the textile sector at the 7th round of Pakistan Turkey Free Trade Agree­ment held in Ankara in June.

He said the rules of origin offered by the Turkish side for Pakistani products were more restrictive than those applied by the EU.

The Pakistani delegation, led by the Secretary Comm­erce Mohammad Younus Dagha, told the Turkish side that such low margin of preference for the textile industry carries no significant benefit, and moreover the rules of origin should be like EU otherwise it would hinder Pakistan’s exports to Turkey, Mr Kanwar said.

He said the 7th round did not fix any month or date for the next round between the two countries. However, he said the matter is likely to be discussed at the senior ministerial level in future.

Sources maintain that Turkey is not letting the textile sector enter its market easily and has offered to reduce duty by 25pc on textile items in five years, with the remaining 75pc duty to be revisited after this period.

It also agreed to reduce the duration of the FTA – one to three years instead of five years.

According to sources, the Turkish negotiating team wanted a generous offer from Pakistan but was not ready to reciprocate; or to meet Pakistan’s demand for inclusion of three or four textile products.

Pakistan Association of Automotive Parts and Acces­s­ories Manufacturers (Paa­p­am) Chairman Mashood Ali Khan said no FTA should be done at the cost of local economy and employment of people associated with it.

“There are more than 300 vendors in the auto sector, millions of people are associated with the industry, the car market is expected to grow by 30pc and new players are willing to invest in Pakistan. At this time any irrational decision would lead to the closure of local industry,” he added.

“If Pakistan needs auto manufacturing, then the industry must be nurtured until the desired volumes are achieved,” he said.

Increasing interest and FDI in the local auto industry due to the China-Pakistan Economic Corridor and encouraging economic indicators present a huge potential for growth of mobility.

“This whole development would be ruined due to the FTA with Turkey without safeguarding local industries first,” Mr Khan said.

The local diaper industry also wants a pragmatic approach to concessions on raw material import against import of finished goods to boost local industry, generate employment and tap export markets, he added.

Ameen Jan, former consultant at Mckinsey and Company and UN, said a policy to reduce customs duty on raw materials would provide an incentive to companies to grow its manufacturing base in Pakistan, rather than importing the same finished goods from their plants in Turkey under reduced tariffs for finished products.

With the FTA negotiations entering the final round soon, Pakistan should ensure a targeted approach to seek tariff reduction from Turkey on high potential export items from Pakistan, while also reducing its customs duties for raw material imports and machinery that is used for local manufacturing, he said.

He noted that trade should spur national economic growth but so far the FTAs do not appear to be connected to the economic growth agenda.

“One reason for the increase in trade deficit is poor negotiation; for example, in the FTA with China many of Pakistan’s leading exportable items were given lower concessions than Pakistan’s competitors from ASEAN, which worsened our competitive position,” he said.

Published in Dawn, July 5th, 2017