Pak China FTA second phase: China likely to make an additional offer worth $1 billion to Pakistan

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Pak China FTA second phase: China likely to make an additional offer worth $1 billion to Pakistan

ISLAMABAD - China is likely to make Pakistan an additional offer worth $1 billion in exports under the revised Free Trade Agreement, it has been revealed.

China is likely to extend unilateral concessions to Pakistan in rice, sugar and yarn contingent on the successful conclusion of second phase of Free Trade Agreement (FTA), well informed sources told *Business Recorder.* The 10th round of China Pakistan Free Trade Agreement (CPFTA) is expected to be held during second week of February 2019 for which agenda is being finalised at the highest level, the sources added.

First phase of CPFTA has been completed in 2012 and the two sides are presently negotiating the second phase for further trade liberalization. Private sector stakeholders are confident that China would allocate a quota for rice, sugar and yarn for Pakistan prior to finalization of second phase of FTA. However, officially confirmation of this plan was not available.

Pakistan has urged China to extend unilateral concessions on its priority export items to restore eroded Margin of Preference (MoP) which was the result of subsequent China FTA’s with other countries especially Association of Southeast Asian Nations (ASEAN) in 2011. Pakistan has also requested China to increase quota of rice and yarn in addition to inclusion of sugar in FTA-II.

“Things are not yet clear, but such matters are being discussed at the highest level,” said an official.

Experts maintain that allocation of quota by any country to a trading partner is a clear violation of World Trade Organisation (WTO) rules and therefore no country can extend a benefit to any other country as per these rules. However, insiders argue that any concession from China with respect to market access would be linked to successful finalization of second phase of FTA.

Pakistan has underscored the need for a win-win situation for both countries in the second phase as the outcome of the first phase has been asymmetrical resulting in huge trade deficit.

Last year while discussing second phase of FTA, the two had reached a consensus that each country shall eliminate 75 per cent of its tariff lines, covering 67 per cent of Pakistani import value from China and 90 per cent of China’s import value from Pakistan and would respectively conduct partial tariff reduction on another 5 per cent of tariff lines; and partial reduction would consist of 3 sub-categories: (i) Margin of Preference (MoP) 20 per cent in force on the day that the second phase CPFTA comes into force; (ii) MoP 20 per cent in force on the first day of 2022; and (iii) MOP 15 per cent in force on the day that the second phase CPFTA comes into force.

During the first official of Prime Minister Imran Khan in November 2018 to China, matters related to trade and investment cooperation were discussed. The two sides noted the growing volume of bilateral trade and agreed to take concrete measures to address trade imbalance that would include exchange of trade missions, broadening market access and simplifying customs, quarantine and phytosanitary procedures.

Pakistani team headed by Secretary Commerce discussed the share of each item of Pakistan’s interest with Chinese officials within the offered cushion of $ 1 billion or $ 1.2 billion per annum exports while China’s exports to Pakistan are around $15 billion.