FTAs with 4 states likely in 2005-06

Published December 21, 2005

ISLAMABAD, Dec 20: China, Malaysia, Thailand and Turkey have agreed to separately sign Free Trade Agreements (FTAs) with Pakistan preferably during the current fiscal year.

Official sources told Dawn on Tuesday that the signing of FTAs with China, Malaysia and Thailand was in the final stages, while talks with Turkey will start here on Thursday.

A number of MoUs had been signed earlier with China to substantially increase trade volume between the two countries especially by eliminating the menace of smuggling that unfortunately existed for the last many decades.

Now, the sources said, final round of talks would be held soon to discuss and finalize the signing of FTA between Pakistan and China. Beijing has assured to remove tariffs on maximum number of items. However, both sides have agreed to initially maintain a small list for retaining certain tariffs on some items which will be notified in their next meeting.

A four-member delegation is leaving here on Wednesday to Kuala Lumpur to further discuss and conclude FTA with Malaysia. Similarly, more talks were expected to be held between Pakistan and Thailand soon to sign FTA.

A Turkish team is arriving on Wednesday to hold talks with Pakistani authorities on Thursday to initiate talks for signing FTA between the two countries.

“We expect to have our trade increased manifold with these four countries after the signing of FTAs with them”, a source said, adding that Pakistan would immensely benefit from these FTAs.

He said that some of the products had been identified between Pakistan and China which would continue to have tariff barriers for some time.

However, sources conceded that there was no breakthrough in signing of FTA with the United States which has linked it with the inking of Bilateral Investment Treaty (BIT) and was unprepared to accommodate Pakistan’s reservations over the issue.

Final round of talks between the two countries would be held in January next year to conclude the much sought after BIT that has now been linked with the signing of FTA.

Pakistan has been given the final text of the BIT duly approved by the US Congress and the Bush Administration did not want any change in it. Islamabad, sources said, was told that it was a “final text” and Pakistan will have to accept it as was accepted by Singapore, Uruguay and couple of other countries.

The US has proposed a “confidentiality agreement” in the proposed BIT text which Pakistan argued needed to be changed and that it should be made open so that the investors should not have apprehensions about it.

There was a clause introduced in the final text by the US government that talked about “pre establishment phase of investment” which Pakistan wanted to be excluded.

According to the proposed clause, if any problem arises for the US investor even when he is in the process of establishing his business in Pakistan, he should be compensated through a court of law. Pakistan pleaded when the business has not been set up, how could any US investor be allowed to seek any compensation and that it was an unjust provision which should be deleted from the final text.

Over and above Pakistan was being asked to accept additional 20-page procedure for dispute resolution other than the one to be brought into the notice of the Washington based International Centre for Settlement of Disputes (ICSID) to deal with arbitration clause in case of a dispute between the US investor, any Pakistani government agency, any individual company or a businessman. Pakistan maintained that it would not accept any “additional measure” being forced by the Americans.

“The Bush government is applying NAFTA standards to sign BIT with Pakistan and this is very unfavourable to us”, a source said, adding that Canada and Mexico were heavily suffering by signing their BITs with the United States due to a number of harsh clauses.

These harsh clauses, sources said, had now been included in the proposed BIT text to sign it with Pakistan. “Due to these clauses the United States had won all the cases against Canada and Mexico and a result both the countries were facing huge financial losses”, another source said, adding that the United States generally carved the BIT with any country in such a manner that in case of an arbitration, interests of the US investors were always well protected.

Earlier, Pakistan had being asking the United States to sign the proposed BIT by dropping its demand that in case of any arbitration only ICSID should be approached for a decision.

Pakistan was “reluctant” to accept the US demand regarding dispute resolution mechanism and said some other international forums, other than ICSID, should also be considered.

Sources said that the Bush administration had urged both India and Pakistan to sign their respective BITs with the United States to reap the benefits of having increased US investment in their countries. The Indian government, which was earlier hesitating to sign the BIT reportedly due to various harsh clauses proposed by Washington, was now willing to go for the treaty.

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