ISLAMABAD: The Commerce Division has announced to sign a revised Free Trade Agreement (FTA) with China next month.

Out of the total 7,120 tariff lines, the Commerce Division held out an assurance to China to reduce duties to zero per cent on 6,000 tariff lines while protection will be provided only to the remaining 1,120 tariff lines, mostly textile products.

The duties will be brought down to zero in a period of 15 years in three phases. One-third of these tariff lines will be removed immediately, half of the remaining will be exempted from duties in the next five to seven years while the rest will be eliminated within 15 years.

However, the Federal Board of Revenue (FBR) fears that the proposed massive tax exemptions will cause considerable revenue loss for the country and has estimated a revenue loss of around Rs100 billion per annum in case the second phase of the FTA is implemented.

FBR has reservations saying the deal will lead to large revenue loss

A senior official in the FBR told Dawn that a summary has been already sent to Prime Minister Shahid Khaqan Abbasi to apprise him over the move of the Commerce Division allowing 75 per cent tariff lines on zero duty to China under the second phase of FTA.“On our summary, the premier has directed the Commerce Division to consult all associations over the proposed move,” the official said, adding that now the Commerce Division is inviting selected associations for meetings.

According to him, Pakistan has already lost Rs32bn revenue because of exemptions under the first phase of FTA in 2016-17.

He said the issue is not only related to revenue loss but also about adequate protection to the local industries. “Our small industries cannot compete with the mighty manufacturers in China,” he continued, saying the proposed move will complete wipe out the small industries in the country.As a result of the first phase of FTA, Pakistan’s exports stood at $1.5bn in 2016-17, while imports from China surged to $15bn.

These massive imports are the outcome of zero duty on 35pc of total tariff lines, the customs official said, adding that the impact in terms of imports and revenue loss will be much higher in case the exemption limit reached 75pc.

“We have imposed regulatory duties on certain tariff lines to protect local industry,” the official continued that there is no compulsion to go for the second phase as Pakistan has no export surplus.

Meanwhile, China’s Ambassador to Pakistan Yao Jing met Pakistan’s Commerce Secretary Younus Dagha here on Monday. The latter briefed the envoy on the status of negotiations on Phase II of China-Pakistan FTA.

An official statement issued by Commerce Division said that Dagha thanked the Chinese government on accommodating the concerns of Pakistan’s local industry and agreeing to provide a competitive edge to Pakistani exporters in the Chinese market.

Published in Dawn, March 20th, 2018