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No headway in $1bn China market access package

Updated December 02, 2018

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Adviser to Prime Minister Abdul Razzak Dawood announced package from China after PM Khan's last visit to China. — AFP/File
Adviser to Prime Minister Abdul Razzak Dawood announced package from China after PM Khan's last visit to China. — AFP/File

ISLAMABAD: The government’s expectation to get market access worth $1 billion in exports to China during the current fiscal year seems to have hit an impasse, Dawn has learnt from official sources.

Adviser to Prime Minister Abdul Razzak Dawood announced the export package from China after PM Imran Khan made a four-day visit to Beijing and Shanghai during the first week of November.

He said that ‘Pakistan has secured market access worth $1bn from China to double country’s exports within one year’. Subsequently, various ministers made public claims that they intend to “double exports to China by the end of the fiscal year.”

However, despite a lapse of one month since the announcement, there has been no official update from the government regarding the status of the package.

According to sources familiar with the matter, the ‘market access’ announcement was earlier misunderstood by Pakistan as Beijing’s willingness to allow purchase of goods on state level to extend benefits to the country. Following the PM’s visit to China, Islamabad expected that China will purchase additional surplus quota of wheat, sugar, rice and other agriculture commodities which are currently subject to restrictions.

However, unconfirmed reports claim that the Chinese authorities have informed the government that any package from Beijing will be a part of the second phase of the China-Pakistan free trade agreement (FTA).

According to the official source, the linking of the package with the second phase of FTA seems more likely now. He added that since the PM returned from China, multiple queries were made regarding the status of the package but government officials failed to provide answers.

Moreover, Pakistan also identified several tariff lines to secure preferential market access under the package, said the official sources adding that Beijing had not elaborated on the details of the agreed package.

The volume of trade between the two neighbours has seen a significant jump during the last decade. Sino-Pakistan trade, which was $4bn during 2006-7, reached an all-time high of $17.4bn last year. The increase in trade between the two came following the China-Pakistan FTA signed on November 24, 2006 and implemented from July 1, 2007.

The FTA covers nearly 7,000 tariff lines at the 8 digit level of the HS code. During the first three years of implementation of Phase-I, both sides reduced tariffs on almost 36pc of the tariff lines to zero.

The Phase-II of the FTA was supposed to commence from the sixth year of the agreement — likely by 2013 — but has numerous delays as officials from both countries failed to reach an agreement despite meeting for more than 10 times. As per the initial agreement, by the end of the Phase-II, both sides were to reduce tariffs on 90pc of the tariff lines to zero duty. The two began negotiations on the Phase-II of Pak-China FTA back in 2011.

During the initial meetings, Pakistan informed the Chinese delegation that the China’s margin of preference to Pakistan under the said FTA had eroded owing to China’s trade agreements with other countries whereas the margin of preference provided to China by Pakistan had remained intact.

Pakistan also raised the concerns of local industry which is being hurt by cheap Chinese imports. Pakistan, therefore, sought adjustments in the Phase-I.

According to the official source, the Phase-II was completely renegotiated to address the concerns of local manufacturers. As a result, talks on the Phase-II have entered a stalemate owing to Chinese unwillingness to address Pakistan’s concerns.

Moreover, “no date is yet announced for the 11th round on the Phase-II of FTA,” the source said.

Published in Dawn, December 2nd, 2018

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