KARACHI: The government has asked China to expedite the second Free Trade Agreement (FTA) and conclude the process by December, a senior official of the commerce ministry told Dawn on Monday.

Delegations from both countries met in Beijing on Sept 14 for the eighth round of negotiations on the FTA. Pakistan now hopes to have a final agreement to sign before the end of the year.

“We have asked for 70 exportable items to be zero-rated immediately,” said the official, who did not wish to speak for attribution due to the sensitivity of the negotiations. The items include textiles, particularly cotton yarn and readymade garments, as well as leather, food and fisheries items.

“If they agree to this list, then we will exchange all the HS codes, which will be divided into four categories, targeted for liberalisation” over the next 15 years.

Islamabad has demanded that 70 exportable items be declared zero-rated immediately

That list could be up to 300 items long. The four categories will define the timeline for future liberalisation. Category 1 will be marked for immediate liberalisation, and can contain up to 70 items. Category 2 will be marked for liberalisation in five to seven years. Category 3 will be liberalised in 10 to 15 years. Category 4 will be those items that will never be liberalised.

The Chinese have replied that they will need to consult with their industry representatives before agreeing. “Once we have agreed to the lists, we will move for signature in December,” the official said.

Some industries that are set to continue enjoying protections include automobile, fertiliser and steel rerolling. “We have already worked on the lists, so we can move quite fast in getting our requirements to them,” the official added.

He said four main industries have suffered the most under the existing FTA whose terms, he said, were favourable initially when it was signed in 2006. But the favourability eroded once China entered into FTAs with other Association of Southeast Asian Nations (Asean) countries on even more generous terms.

“Cotton yarn, for example, was at 3.5 per cent for us, but became zero for Asean countries after their FTAs. For 79pc of our products, the tariff preference was eroded,” he said.

The four industries affected most adversely by the FTA, according to him, are ceramics, steel, cables and rubber.

“These are the players that have lost the most” due to the erosion of tariff preference with China under the first FTA.

Published in Dawn, September 26th, 2017