ISLAMABAD, Feb 9: Pakistan’s bilateral trade deficit with China has ballooned over 53 per cent despite a free trade deal struck five years ago on assurances that it would increase Pakistan’s exports to China.

Statistics compiled by the commerce ministry showed that bilateral trade had grown to $8.90 billion in 2011-12 from $4.10 billion in the year 2006-07, almost doubled but highly in Beijing’s favour.

China had a massive $4.53 billion trade surplus with Pakistan in 2011-12, from $2.955 billion in 2006-07.

The bilateral free trade agreement (FTA) between Chain and Pakistan was implemented from July 1, 2007. The investment part of the agreement was effective from October 15, 2008 and services agreement from October 10, 2009.

Analysts described the FTA with China as a political decision since it did not involve any economic benefits for Pakistan as its products are not capable to compete with those coming from other countries of the region or with the local Chinese products.

China has emerged as a major importer of natural resource related and agricultural products. Major resource exporters include Indonesia, Mongolia and the Russian. Agriculture is a major export for countries such as Thailand, and Indonesia as well as for many low income countries such as Pakistan in the region.

Pakistan’s manufacturing sector lacks sophistication and understanding of the Chinese market and to overcome this, Pakistan will have to diversify the basket of exports to China.

The Chinese do not eat basmati rice, Pakistan’s main farm export, nor are they interested in importing textiles and garments which are produced with better quality in their own country, an official said.

Even surgical instruments, sports and leather goods could not penetrate the Chinese market because of local production, making the free trade agreement irrelevant from Pakistan’s point of view.

Statistics shows that Pakistan’s imports from China reached $6.71 billion in 2011-12 from $3.53 billion in 2006-07, showing an increase of 90 percent since the signing of the FTA.

Islamabad exports to China reached to $2.18 billion in 2011-12 from $0.575 billion in 2006-07, reflecting an increase of 279 percent. However, no tangible increase in exports was recorded in the first three years of the signing of the FTA, as it remained less than a billion dollar until 2008-09.

Pakistan’s exports to China were recorded at $1.15 billion in 2009-10, $1.63 billion in 2010-11 and $2.18 billion in 2011-12, respectively.

A commerce ministry official said that the ministry was working on preparing modalities for the second phase of reduction on tariffs between the two countries under the FTA.

The tariff reduction in the first phase has almost been completed.

The official also said the factors that might have hampered the exports included lack of China-specific trade specialists, lack of preparation and guidance of the business community to explore market under the FTA, language issues and lack of knowledge to exploit the segmentation in Chinese market from low to high value-added products.

By Aamir Shafaat Khan