TAPPING HUGE POTENTIAL OF BILATERAL TRADE WITH CHINA
Jan 17 - 23, 2011
Pakistan, though close friend of China, has so far failed to improve its export to China. On the other hand, the country proved an attractive export destination for China despite its weak economic performance.
Pakistan has so far failed to tap the huge potential of its bilateral trade with China. Though China's global imports have crossed one $1trillion, yet Pakistan's exports to China are still short of one billion dollar mark.
Despite a Free Trade Agreement (FTA) signed by the two countries in 2006, Pak-China trade has still not developed up to its potential and it has largely been in favor of China. Pakistani exporters urge the government to get maximum trade benefits from United States and Europe to bring foreign exchange to the dollar-starved country whose most exports still go to the US and Europe. The US is however reluctant to allow the country immediate market access through duty reduction due to the fear of loss of jobs in the US especially in the US textile sector.
The trade potential with China can be tapped by exporting cotton, cotton fabric, marble, marble craft, seafood, leather, leather goods, leather garments and rice to China. There is a need to do research work and send trade delegations to China. The country plans to participate in 15 exhibitions in China and send eight trade delegations in a bid to improve its exports. Last month, the Trade Development Authority of Pakistan (TDAP) launched its web portal to link businesspersons and traders of Pakistan and China by providing information on various trade-related issues.
Experts suggest that TDAP should set up a separate desk for trade potentials in China, which is competing in almost all the major sectors of Pakistan's potential export areas. Pakistani business community should not remain confined to their established export destinations- United States and Europe. TDAP needs to create awareness about the business opportunities in China.
Boosting trade and investment with Pakistan was the focus of the first visit by a Chinese premier Wen Jiabao last month in five years to the country. According to Pak-China trade projection, volume of the trade between the two countries would be increased from current level of around $4.5 billion to $10 billion during next two years and to $25 billion by 2015. Pakistan needs a jump-start to enhance the trade volume and diversify its exports to China and other countries.
During Wen's visit last month, the two countries signed 35 agreements and MoUs, worth $35 billion, on cooperation in economy, energy, banking, security and technology as the Pak-China Business Cooperation Summit concluded on December18. Almost 260 Chinese delegates and 150 representatives of Pakistan from different investment sectors participated in the summit. In his address to the summit, Pakistani prime minister Yousuf Raza Gilani expressed hope that trade between the two countries will rise to between $15 billion and $18 billion over the next five years. Speaking on the occasion, the visiting Wen Jiabao said that China was aware of Pakistan's desire for cooperation to bridge the pressing gap in energy and would continue to cooperate in peaceful use of nuclear energy with Pakistan.
Islamabad eyes to increase the country's export share in the Chinese market, which has global imports worth over $1 trillion. The visiting Chinese prime minister said that China is cognizant of Pakistan's reservations about low exports, a cause of heavy trade imbalance.
Last year, China agreed to facilitate export of substantial Pakistani goods, unilaterally, in addition to the goods being traded under the existing FTA, which would help increase the country's exports to China by $1 billion annually. The concessions had been granted after the visit to the country by Chinese Vice Premier last year. China granted four types of trade concessions to Pakistan unilaterally. Firstly, China would provide duty concessions on tariff lines not covered under Pakistan-China Free Trade Agreement and a list of such products is being finalised in consultation with stakeholders. Secondly, concessions have been offered to Pakistani exporters for participation in trade exhibitions to be held in China. Thirdly, China has also offered that buyers' missions of Chinese state enterprises would visit Pakistan and place bulk import orders for Pakistani manufactured goods and would form long-term trade relations. Finally, China has also offered training programmes in various industrial categories in Pakistan so that the existing gap in skilled human resource availability is bridged.
The analysts stress the need to revise the Pak- China FTA after signing of FTA deal between China and Association of South East Asian Nations (ASEAN), as they fear that China-Asean FTA would have negative impact on Pak-China trade, as most of the Asean countries, which are competitors of Pakistan, are now enjoying more tariff concessions under the FTA regime. The ASEAN's trade surplus with China due to the FTA deal increased to 2.7 billion dollar from 300 million dollar last year, while Pakistani products are facing tough competition in the Chinese market. As the cost of doing business in Pakistan is comparatively high due to energy shortages and deterioration of security, the products of ASEAN countries are getting more places due to their lower cost.
The FTA between China and 10-member states of ASEAN, which covers 1.9 billion people, came into effect on January 1, 2010. This FTA has reduced tariff on 8,771 product categories to zero per cent, which cover 90 per cent of imported goods. Average tariff rate for Chinese goods exported to ASEAN countries has decreased from 12.8 per cent to 0.6 per cent whereas average tariff rate for ASEAN goods exported to China has decreased from 9.8 per cent to 0.1 per cent as of January 1, 2010. This reduction in tariff rates under FTA has taken effect between China and six original member countries of ASEAN such as Malaysia, Indonesia, Thailand, Singapore, Philippines, and Brunei. The remaining four countries such as Vietnam, Laos, Cambodia, and Myanmar will follow the suit in 2015.
Bilateral trade between the two countries during last fiscal year reached $4.42 billion, with imports from China standing at $3.283 billion and exports to China at $1.209 billion. Average imports each year in last three years (FYs 2008-10) stood at $3 billion and exports to China were recorded at $445 million showing a ratio of eight to one.
Bilateral trade did not improve during first four months of current fiscal year (July-October) as imports from China stood at $1.338 billion and exports were at $356 million. The major challenge for the Pakistani exporters is to bridge the wide gap.