ISLAMABAD, Jan 21: Pakistan on Tuesday decided to bind its industrial tariff rates at 50 per cent points to ensure maximum flexibility in negotiations under Doha round of the World Trade Organization.

The decision was taken at a meeting of the Economic Coordination Committee (ECC) of the cabinet presided over by Adviser to the Prime Minister on Finance, Shaukat Aziz, here on Tuesday.

At present around 38 per cent of Pakistan’s total tariff lines are bound while 62 per cent unbound. Under the decision, Pakistan’s Schedule-XV commitments on tariff bindings have also been revised, a senior official told Dawn in a background briefing to Dawn.

During the Uruguay Round of multilateral trade negotiations, which gave rise to the establishment of WTO, countries were required to make a commitment on not to raise their tariffs of various products beyond specified limits.

Pakistan also committed to bind some of its tariffs at certain specified levels. Detailed information regarding these bindings is contained in Schedule-XV of Pakistan to GATT.

At that time the applied rates of Pakistan’s import duties were much higher than today. Resultantly, the bindings made were also correspondingly much higher than required today.

Moreover, at that time Pakistan only bound around one third of its tariff lines. Since then a major tariff rationalization effort was undertaken and the result is that now around 38pc of our total tariff lines are bound while 62pc still remain unbound.

In a cautious mood, Pakistan bound down only one third instead of all items. Moreover, the bindings were made at a level considerably above the applied tariffs so as to allow some flexibility to the government to revise its tariffs upwards if and when required.

Since 1994 when the bindings were made Pakistan’s applied tariffs have been reduced significantly. Resultantly maximum rates now stand at 25 per cent with the exception of a few tariff peaks for items like automobiles.

The present position of binding is that out of a total of 6051 tariff lines, 2306 lines (38.1 per cent) are bound. In agriculture around 708 out of 823 lines are bound within a range of (30-200 per cent). In textiles 519 out of 913 lines (57 per cent) are bound within a (5-50 per cent) range while in the remaining 1087 lines only 25.2 per cent lines are bound in the (20-100 per cent) range.

As against this India has bound 72.4 per cent of its total schedule whereas Egypt and Thailand have bound 98 per cent and 69 per cent and 69 per cent of their Schedules respectively.

In this way, virtually all agricultural products have already been bound, albeit at a much higher level than what is necessary. In the case of non-agricultural products, however, the position is that most of them are unbound.

Now with the new Doha Trade Round under way, there was a need to review this situation, especially in the context of the ongoing negotiations on market access for non-agricultural products.

In the present initial stages of these negotiations the emphasis is on determining the modalities of further reduction in the level of tariff and non-tariff barriers to trade. In the area of tariffs the current debates is whether further reductions should take place from the level of applied rates or bound rates.

The normal practice in previous rounds of trade negotiations has been that the bound rates have been used as the base line for further reductions. From Pakistan’s point of view also, it is better that bound rates are used as a basis for further reduction commitments, especially since applied rates are already quite low.

As a result, when substantive negotiations begin, Pakistan can put forward all its bound rates as a basis for negotiations and avoid the risk of its low applied rates being made the basis.

Under the decision, Pakistan has now to proceed to bind its remaining unbound tariff lines. As a general principle, Pakistan would bind its respective rates at 50 per cent points above current applied rates. This 50 per cent margin will give Pakistan the requisite flexibility during the negotiations.