IS PAK-CHINA FTA IN SUSPENSION?
Feb 28 - Mar 6, 2011
The facility of Free Trade Agreement (FTA) between China and Pakistan is virtually in suspension due to unavailability of new signatures in respect of Pak-China FTA with the Pakistan Customs Authority. Local importers are facing losses, as Customs authorities are delaying the clearance of Pakistan-bound consignments at Chinese ports.
Pakistani importers blame the Ministry of Commerce for not acquiring new signatures of Pak-China FTA since 2009, while the Pakistani importers are facing losses, which has also increased the cost of doing business. The two countries signed FTA deal in November 2006, which came into effect on July 1, 2007. The total volume of Pakistan-China trade rose from $2 billion in 2006 to $8.7 billion in 2010. Islamabad and Beijing have resolved to increase their trade to $15 billion in the shortest possible time. Official figures reveal that Pak-China bilateral trade registered an overall growth of 28 percent in 2010 to reach the $8.7 billion as compared to $6.7 billion in 2009. Critics say that unwarranted delay in exchange of signatures contradicts the tall claims of trade promotion at official levels between the two countries under FTA, as traders of both countries are paying the price for the official delays.
The facility of Pak-China FTA is somehow suspended due to unavailability of new signatures and consequently, imported consignments are facing excessive delays in clearance. Chairman Pakistan Chemicals & Dyes Merchants Association (PCDMA) Muhammad Haroon Agar reportedly said in a statement that the imposition of demurrage on imported consignments has increased the cost of doing business and importers fear colossal financial losses.
Pakistan's exports to China include cotton yarn and fabrics, synthetic yarn and fabrics, garments, home textiles, chromium and other ores, fish and fish products, vegetable and animal products, marble, granite and stone products, medical instruments, sports goods, carpets etc.
From China, Pakistan imports polyester and silk fabrics, polyester staple fabrics, fertilizers, tyres, mobile communication equipment, gas turbines, motorcycle parts, combustion piston engines, electrical appliances, iron and steel products, and various other forms of machinery.
In the last calendar year, Pakistan's exports to China witnessed an increase of 37.4 per cent to $1.7 billion, compared to $1.2 billion in 2009, according to the figures recently released by China Customs. The trade deficit for Pakistan, however remains at $5.2 billion, as the country's imports from China also increased by $1.4 billion and the total volume of imports from China stood at $6.9 billion In 2010.
Pakistan, the second largest trading partner of China in South Asia. has requested China to give unilateral tariff concessions to 268 Pakistani product lines. The country has also proposed to China for the development of an efficient Electronic Data Interchange (EDI) to realize the full potential of the FTA.
"Despite the encouraging growth pattern, we would not sit on our laurels. There is a long way to go as we have to achieve the $15 billion mark and move beyond it in the near future," APP reported Masood Khan, Pakistan's Ambassador to China as saying.
The growth in Pakistani exports is attributed to the enhanced market of cotton yarn and mineral products in China. Last year, the biggest spurt in Pakistani exports to China has been in cotton yarn, home textiles, garments, ores and mineral products, copper and copper scrap, leather goods, fish products, electrical goods, and medical and surgical instruments.
The second meeting of Pakistan-China Free Trade Commission (FTC) in November also gave a fresh stimulus to promote Chinese investment in Pakistan. Furthermore, during Premier Wen Jiabao's visit to Pakistan in December last month, the two sides decided to launch in the first quarter of this year the second phase negotiations of Pak-China FTAs with the objective to enhance trade liberalization and to promote economic and trade growth of the two countries.
The two countries have facilitated integration of their economies for mutual benefit by signing FTA covering goods, investment and services. It would be a colossal job for the Pakistani exporters to bridge the wide gap, which would not be possible without the help of the Chinese. 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.
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.
Critics say that numbers of Chinese exports from China to Pakistan do not match the numbers reflecting Pakistani figures of imports from China showing much larger exports from China.
Some analysts believe that if Pakistan's exports have increased, then its imports from China have also increased in 2010. They contend that China's trade surplus will continue to rise because Pakistan has less to offer to the economic giant and importing more from there. Misuse of FTA facility, involving importers who submit wrong 'certificates of origin' to clear non-Chinese made goods from Pakistani ports, has also been detected and reported.
Though China's global imports have crossed one $1 trillion, yet Pakistan's export to China is still short of one billion dollar mark. 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.
Some analysts urge the government to reconsider FTA deal with China, particularly after the FTA between China and 10-member Association of South East Asian Nations (ASEAN), which came into effect on January 1, 2010. 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.