KARACHI, Nov 4: Pakistan and China are signing a full-scale Free Trade Agreement (FTA) in last week of this month when Chinese President Hu Jintao visits Pakistan at the head of a big delegation.

But businessmen in Pakistan have strong reservations on the list of items finalised bilaterally for FTA and they also want certain irritants to be removed before going ahead.

The biggest irritant is quarantine conditions in China which has restricted shipment of mangoes and other fruits, vegetables and grains to China despite the fact that the Early Harvest Programme (EHP) concluded in April 2005 specifically made provisions for this.

“Mangoes can be shipped to China only after hot water treatment which is not available in Pakistan,” a leading businessman disclosed. For obvious reasons businessmen are not ready to disclose their identity but their views are based on their many year experiences of trade with China.

Pakistan wants to sell rice, mangoes, potatoes, onions dates and apricots but quarantine remains the key issue between the two countries in implementation of the EHP which mainly focuses on agricultural goods. At the time of signing of the EHP there was a talk of Pakistan’s agricultural ministry and Chinese Administration of Quality Supervision, Inspection and Quarantine will jointly work out an agreed mechanism.

Businessmen in Karachi complain that no such mechanism has been worked out as yet even after 20 months of the signing of the EHP and even now when a full-scale FTA is about to be signed in last week of this month.

Pakistan and China are poised to sign a full-scale FTA when quantum of two-way trade has already increased considerably and is expected to be more than $5 billion this year.

Official trade statistics of Pakistan and China differ considerably because of what is being alleged the under-invoicing resorted by the Pakistani importers of Chinese goods.

Central Board of Revenue Chairman Abdullah Yusuf is on record of having declared that Pakistan Customs showed $2.5 billion import from China in 2004-05 but the documents of Chinese customs showed these imports at $3.5 billion.

Businessmen in Karachi do not contest allegation of under-invoicing and they justify it by blaming the government of failing to effectively stop smuggling of Chinese goods through Sust border and leakages, massive under-invoicing and mis-declaration from many of nine dry ports in the country.

“A genuine importer of Chinese goods is left with no choice but to under-invoice to compete smuggled goods from China,” a businessman said.

The second reason for difference in official trade statistics of China and Pakistan is because China computes import and export from the port of origin. A good imported from China to Dubai, Singapore, Hong Kong for trans-shipment to Pakistan is put in category of Chinese export to Pakistan and hence the difference.

The massive influx of Chinese goods — legally or illegally — has helped as well has hurt Pakistan economy. Import of two-wheeler from China has helped bringing down prices of motorcycles and scooters in the market and it has broken the strong cartel of Japanese auto makers.

The Japanese auto assemblers now fear of assembling of small Chinese cars in Pakistan. The Chinese appliances too have impacted on Japanese and Western assemblers of air-conditioners, refrigerators and other items.

But the heavy influx of Chinese textiles, batteries, stationery items, footwear, stationery items into Pakistan market have led closure of hundreds of industrial units in Pakistan.

Businessmen doubt whether the bureaucrats in Pakistan took into consideration the impact of heavy import from China on Pakistan’s industry when they signed first the Preferential Trade Agreement in 2004 and then EHP in 2005 and now about to conclude the FTA in 2006.

The EHP offers tariff reductions on 3,000 items —industrial goods and agricultural products - to both China and Pakistan in three phases. The first phase has begun from January this year in which at an average China has offered a 27 per cent concession in duties while Pakistan reciprocated with an average 22 per cent.

Under this tariff concession plan all those items on which the rate of duty is 15 per cent or more have been brought down to 10 per cent from the beginning of this year. These will be further reduced to 5 per cent next January and finally to zero in January 2008.

Under the tariff reduction arrangement worked out in the EHP and that will continue after signing of a full-scale FTA textiles, towels, late this month, China is reducing customs duty to zero on import of industrial alcohol, bedlinen, table linen, other home textiles, towels, cotton and blended fabrics, synthetic fabrics, tarpaulin, marble items, surgical instruments, sport goods, cutlery, certain dyes, guar gum, medicines, leather products, leather garments, curtains and iron windows and doors.

Pakistan offers same tariff concessions to China on import of organic chemicals, leather and textile machinery and their parts, industrial washing machines, dyeing machines and machinery for pressing and grinding. In the first phase China has offered zero duty on 769 items from Pakistan while Pakistan is giving this concession to 486 Chinese products.

China is the second country with which Pakistan is signing a full-scale FTA after Sri Lanka. Pakistan has signed a Preferential Trade Agreement (PTA) with Turkey, an EHP with Malaysia. Pakistan is already involved in FTA negotiations with USA, Indonesia, Jordan, Thailand, Malaysia, Singapore, the Gulf Cooperation Council (GCC) and Russia.

Negotiations on a US-Pakistan bilateral investment treaty, a step towards an FTA is found to be riddled with more than one problems.