Gains of Phase-II of China-Pakistan FTA

  • After the 11th Round, China agreed to immediately eliminating tariffs on 313 most priority tariff lines which cover over $8.7 billion worth of our global exports (13% increase in Pakistan’s global exports coverage) and $64 billion worth of Chinese global imports (additional US$ 40 billion).
  • Increase in the protected list of Pakistan from 10% agreed during the Phase I of CPFTA – to 25% that comes to around 1760 tariff lines and covers 37 percent of Pakistan’s imports from China.
  • 25% includes sensitive list of 1410 items (20%) and a list of 350 items given MOP on the applicable rates (5%).
  • The major protected industry includes textiles and clothing, iron and steel, auto, electrical equipment, agriculture, chemicals, plastics, rubber, paper and paper board, ceramics, glass and glassware, surgical instruments, footwear, leather, wood, articles of stones and plaster and miscellaneous goods. In a nutshell we have protected almost all of our industry.
  • In the Phase I, Pakistan had already given substantial concessions on 60% of our imports from China, and with this new Phase in place we will liberalize another 7% in the next 15 years. Most of concessions have been placed in the 15 years track.
  • The 7% new liberalized trade constitutes raw materials, machinery and intermediate items which will in fact help the domestic industry to become more competitive.
  • Until March 2018, China had agreed on immediate liberalization on 57 tariff lines which covered 70% of Pakistan’s global exports and around US$ 20 billion of China’s global imports.
  • Under the complete offer from China, over $19 billion of our exports will be covered corresponding to $1.6 trillion of the China’s global imports.
  • Under the 313 tariff lines currently our exports to China are less than 2% of their total imports, and with these concessions we should expect to gain our market share by at least 10% which will come around $6.5 billion per annum.
  • The 313 tariff lines constitute textiles and garments, seafood, meat and other animal products, prepared foods, leather, chemicals, plastics, oil seeds, footwear as well as engineering goods including tractors, auto parts, home appliances, machineries etc.
  • With the signing of this FTA, almost 95% of tariff lines will become part of the overall CPFTA framework and will therefore enable Electronic Data Exchange on these tariff lines which also constitute 95% of the imports from China. Therefore, this will be great step forward in terms of curbing under invoicing and misclassification.
  • Revision of safeguard provisions will provide protection of maximum 23 years against an import surge that may cause injury or threaten to cause injury to our local industry.
  • The measures also allow us to put in place provisional safeguards for 180 days before even proving injury or threat of injury.
  • Similarly, the safety valve of the Balance of Payments clause under the FTA, has been introduced, which would now allow us to raise tariffs if our country is in a balance of payments difficulty.
  • Continuing with Phase-I is not economically viable which leaves us with two options: to revoke Phase-I, or to enter Phase-II and gain major market access.
  • The option of revoking Phase-I will have major political implications while the entry into Phase-II will lead to the above mentioned major gains.