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The architecture of the bilateral Free Trade Agreement includes Trade in Goods
and Investments in the first Phase and the leaders of both the countries have
decided to negotiate on Trade in Services during 2007 to enlarge the coverage of
the Free Trade Agreement.
LATEST ACHIEVEMENT
After completing all procedures for entry into force, China and Pakistan have
exchanged diplomatic notes on the Free Trade Agreement on Trade in Services.
The Agreement will come into effect on October 10, this year. The FTA on Trade
in Services was signed by Pakistan and China during President Asif Ali Zardari’s
visit to Wuhan in February. The diplomatic notes were exchanged by Secretary
Commerce Suleman Ghani and Chinese Assistant Commerce Minister Wang
Chao, the diplomatic sources.
The Early Harvest Programme between the two countries which was put into
operation on 1st January 2006, has been merged into this bilateral FTA. In the
overall package Pakistan will get market access at zero duty on industrial
alcohol, cotton fabrics, bed-linen and other home textiles, marble and other tiles,
leather articles, sports goods, mangoes, citrus fruit and other fruits and
vegetables; iron and steel products and engineering goods. China will also
reduce its tariff by 50% on fish, dairy sectors; frozen orange juice; plastic
products; rubber products; leather products; knitwear; woven garments etc.
Pakistan has given market access to China mainly on machinery; organic; and
inorganic chemicals, fruits & vegetables, medicaments and other raw materials
for various industries including engineering sector, intermediary goods for
engineering sectors, etc.
China and Pakistan are poised to widen the silk road between them by building a
free trade area (FTA). For Pakistanis, it is mainly a "cotton road.'' Currently, 70
per cent of Pakistani exports to China are cotton yarn and cotton fabric.
However, the country is also keen to promote its other products ranging from
mangoes to footballs.
During Pakistani Prime Minister Shaukat Aziz's visit to Beijing in 2007, a protocol
was signed for the talks on the establishment of an FTA between the two nations,
currently with an annual trade volume of around US$2.5 billion. Negotiations will
start in January 2008 and could be concluded within one year.
"I believe Pakistan and China will be very accommodating to each other in the
FTA talks because of good relations between the two countries,'' Tariq Ikram,
minister of state and chairman of the Export Promotion Bureau of Pakistan, told
China Business Weekly in an interview. "Pakistan will respect China's needs, and
China will also respect ours. The negotiations will not be difficult.'' Chen Chao, an
official with the International Trade Department of China's Ministry of Commerce,
also said the relationship between the two nations is a very favourable factor for
the FTA talks.
In economic terms, it would not be hard to obtain a win-win deal, he said. "The
difference between Chinese and Pakistani goods in bilateral trade is relatively big
and the number of their competing goods is relatively small,'' he said in a written
interview with China Business Weekly. Currently, more than 70 per cent of
Pakistan's exports to China are cotton yarn or cotton fabric. The rest are leather
products, minerals and seafood. China's main shipments to Pakistan include
machinery equipment, chemicals, electronics and footware.
Now Pakistan intends to sell more grain, fruit and vegetables to China. Shahid
Mahmood, commercial and economic counsellor of the Pakistani Embassy in
Beijing, said an "early harvest programme,'' which will mainly focus on
agricultural products, is expected to be rolled out six months after the FTA talks
are launched. Quarantine is a key issue here. Pakistan's Ministry of Agriculture
and China's General Administration of Quality Supervision, Inspection and
Quarantine are already talking about a mechanism to grant certificates to
qualified Pakistani exporters.
The farm products Pakistan wants to sell to China include rice, mangoes,
potatoes, onions, dates and apricots. People in Beijing and Shanghai will not see
much of these Pakistani produce appear in their supermarkets because,
according to Mahmood, they will mainly target China's western regions, with
which Pakistan has fairly good land transportation connection. Mahmood said he
recently travelled along the roads linking China's Xinjiang Uygur Autonomous
Region and northern part of Pakistan and found conditions there are satisfactory
enough for the expansions of cross-border trade.
For the Chinese side, a market with 150 million people in Pakistan is undoubtedly
a source of great opportunities. A Sino-Pakistani FTA, which will mean less or
zero tariffs for many products, could make the market more attractive. Ma
Chunyan, an official with the chemical section of the China Council for Promotion
of International Trade, sees a great market for Chinese pesticide and fertilizer
producers. "I know a woman making 1 million yuan (US$120,000) in commission
this year by serving as an agent selling pesticide to Pakistan,'' she said. Chinese
business people can benefit from the FTA not only by selling China-made goods,
but also by investing in the country, Ma said. Some Chinese pesticide producers
are already thinking about investing in Pakistan because of the market demand
and low labour costs, she said.
INVESTING IN PAKISTAN
China is holding FTA talks at different levels with countries in Southeast Asia,
around the Gulf and in Latin America. Pakistan has signed an FTA agreement
with Sri Lanka. It is discussing the same issue with Iran and Bangladesh. It is just
natural that China and Pakistan should also establish an FTA, said Sun Shihai, a
senior research fellow with the Institute of Asia-Pacific Studies under the Chinese
Academy of Social Sciences. During the past few years, the Pakistani economy
has shook off stagnation and become healthier. The economy is estimated to
grow by 7 per cent in 2004, as compared to zero growth five years ago. Inflation
has dropped to a benign 4.5 per cent from 10 per cent in 1999.
China's trade volume with Pakistan now accounts for 20 per cent of China's total
trade with South Asia, which also includes India, Nepal, Bangladesh, Sri Lanka
and Maldives. South Asian nations are discussing an FTA of their own. In fact,
China is active in promoting economic co-operation with the entire region. A
conference was held last week in Kunming, in Southwest China's Yunnan
Province, on co-operation between Yunnan, South Asia and Southeast Asia.
AT PRESENT
Secretary Suleman Ghani and Wang Chao co-chaired the opening ceremony of
the first meeting of the Trade Commission. They expressed full satisfaction on
successful implementation of FTA which had been operative since July 2007.
Pakistan’s Ambassador to China, Masood Khan, also attended the meeting.
Senior Joint Secretary Shahid Bashir and Deputy Director General Zhu Houng
addressed the technical issues in defining FTA’s regime which covers goods,
investment and services. The two sides also tried to address issues to refine
procedures for visa facilitation and dissemination of information. Both sides
expressed satisfaction that the international financial crisis had not affected
Pakistan-China trade which stood at US $ 6.9 billion in 2008.
Pakistani and Chinese officials said to get full advantage of FTAs all out efforts
would be made to explore investment in the manufacturing sectors in Pakistan
with buy-back arrangement. A free trade agreement with China when even
negotiations on a bilateral investment treaty with the US have remained stalled,
and the possibility of a FTA between the US and Pakistan has been shot down
by US officials in two administrations now. Heck, even the ROZ's to help combat
poverty and increase employment opportunities in the Tribal belt to counter
terrorism are still stuck up. And some Americans wonder why Pakistan has more
cordial relations with the Chinese - no substitute for loyalty and sincerity.