Page 9 - November/December-2019

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Pak-China: Free Trade

Agreement-II to come into effect

China has given approval to early activated of its

Free Trade Agreement (FTA) with Pakistan

The textile sector of Pakistan will get a boost in During the first phase of the FTA, local manufac-
exports to China as the second phase of the Free tures complained about the unbalance in the
Trade Agreement (FTA) between China and deal, especially the textile sector which raised
Pakistan will offer the same tariff concessions concerns about the favours it granted the
enjoyed by the ASEAN countries. Chinese textile industry. They believed that the
FTA was damaging the local industry and giving
The agreement covers 313 tariff lines of US $8.7 undue advantage to the Chinese. The govern-
billion Pakistan's overall exports and US $64 ment took note of the demands by the industry
billion of China’s global imports. Textile and as they pointed out that during the first phase,
garments sector is at the forefront of this deal tariffs were imposed on Pakistani textile exports.
and will help enhance the sector’s exports to At the same time, they complained that the
China as it offers the same duty free access to country’s competitors from the ASEAN had duty
ASEAN countries. free access to the Chinese market.

The agreement is already bearing fruits as the To fix this disparity, the Pakistani government held
Indian yarn exports dropped more than 38 several rounds of negotiations with their Chinese
percent for the first six months of the current counterparts and now hope that the second
fiscal year. According to reports in the Indian phase of the FTA would overcome the concerns
press, the cotton yarn exports between April and of the local manufacturers and increase exports.
September of this year dropped from US $2.08 As a counter-measure, the sensitive list had been
billion to US $1.27 billion compared to the same increased from 10% to 25%, totaling 1760 tariff
period from last year. lines and covers 37% of Pakistan's imports from
China. This, the two sides hope, will give protec-
The Indian report cited the FTA’s second as a tion to Pakistani industry from Chinese import,
major reason for the decline as it said that the and the textile and garments sector is a major
India did not enjoy the same tariff free access to beneficiary of this sensitive list. Whereas, the
the Chinese market, whereas India had to pay 3.5 tariffs from the industry had also been lifted to
to 5 percent tariffs. increase the export of the sector. The Chinese
side also agreed to immediate market access on
The full effects of the second phase of the FTA its priority products, tariff reduction and measures
could be gauged after the deal comes into effect for protection of the domestic industry on
from December 1, which would boost the exports Pakistan’s request.
of Pakistani products to the Chinese market.
Earlier in the month, Abdul Razak Dawood, The first phase of FTA between China and
Adviser to the Prime Minister for Commerce, Pakistan was signed on November 24, 2006 and
Textile, Industry & Production and Investment, became operational in 2007. The negotiations for
announced that the second phase would come the second phase began in 2011 and after eleven
into effect from December 1 and it was becoming rounds, both sides signed the agreement in April
operational earlier than usual. He said that it of 2019 in Beijing.
usually took a year to make such agreements
operational between countries but because of the Now, the second phase is about to take effect
special relations enjoyed by both the countries. which is already showing some positive signs.

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