The second part of China Pakistan Free Trade Agreement (CPFTA-II) has become functioning in the start of 2020 and this indeed takes a new turn for Pakistan-China relations in terms of economy. This agreement has made all the tariffs end on 313 products instantly for Pakistan along with this 75% tariff will be eased in duration of a decade. This will make the exports of Pakistan to have an improved access to markets of China. There are so many products which are under the discounted tariffs containing, garments, seafood, textiles, leather, chemicals, meat, footwear and plastic. FTA has enhanced the protection mechanism for the domestic industry in Pakistan, presented a safe regulator against balance of Payment problems and has also implemented electronic data maintenance and exchange in order to avoid any issue in the invoicing of imports from China.
Pakistan is a country which has lack of exports; the existing account deficit has made Pakistan seeking repeated bailouts from IMF. Only if we see the trade deficits with China, it added 34%to Pakistan’s total trade deficit. The world’s largest import market shares border with Pakistan which gives Pakistan a good access to the two trillion export market. It can be a game changer for Pakistan.
In the first phase of CPFTA-II signed in 2006, the exports to china increased but the imports were still higher, which led to growth in Pakistan’s trade deficit with China. The agreement could have been better negotiated, like if only a single product from Pakistan’s 20 exporting garment was listed in category 1concessionn with tariff rate 0%, whereas none of Pakistan’s top exports was covered under category-2, with tariffs of 0-5% in five years.
There were few more issues in the agreement, even though FTA puts 0% tariff 35% of goods in five years
Yet by 2012, Pakistan’s exports to China targeted solely on 6% of the merchandise enjoying third tariff, representational process marginal use of this competitive access, recognition to a slender export base. Moreover, presently once the FTA was signed, the ASEAN-China trade was created, granting far more profitable concessions to Association of Southeast Asian Nations countries, thereby wearing away Pakistan’s comparative advantage. Lastly, the non-tariff barriers additionally prevented exports in several classes.
While the CPFTA-II is far higher negotiated, while not substantial domestic efforts several of the granted concessions can at the best lead to export diversion instead of a complete export increase. What we want is a rise in producing capability, including increased fight, trade facilitation and data dissemination. In several cases, the non-tariff barriers would need to be puzzled out still. Besides new capability, we have a tendency to additionally get to aim for export sophistication, moving on to higher added merchandise.
Moreover, the trade agreement mustn’t be checked out in isolation and rather in conjunction with the China Pakistan Economic passageway (CPEC). Not exclusively has CPEC improved property with China; however the special economic zones, underneath the CPEC, it should also be utilized to attract investment in targeted sectors and goods that the FTA is anticipated to spice up demand. The private sector additionally has got to play its half. Building a brand new market needs exploring new customers, investment in analysis and development, overcoming language barriers and creating new partnerships.
With entrepreneurs as leaders, the government must also to follow the private sector’s lead and address technical barriers to exchange promising areas. If we have a tendency to benefit from the FTA and CPEC, the economic, trade and investment policies must have one focus: however we will sell a lot to China.