A Protocol on the Phase-II of the CPFTA has been signed by Pakistan and China during the visit of the Prime Minister to Beijing on 28th April, 2019. In pursuance of Article 79(2), the Amending Protocol will form an integral part of the China-Pakistan Free Trade Agreement.
2. Under the Phase-II, Pakistan has secured enhanced and deeper concessions on products of its export interests, revision of safeguards mechanism for protection of the domestic industry, inclusion of the balance of payment clause as a safety valve against balance of payments difficulties, and effective enforcement of the electronic data exchange.
3. The major features of the agreement in Phase-II inter-alia include:
i. Market Access: Under the Phase-II of CPFTA, both countries will liberalize 75% of tariff lines for each other in a period of 10 years by China and 15 years by Pakistan. China will immediately eliminate tariffs on 313 most priority tariff lines of Pakistan’s export interest. Overall, China has granted concessions to products which include 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.
Pakistan has offered market access to China on raw materials, intermediate goods and machineries. Access to cheaper imported inputs and machinery will improve Pakistan’s export competitiveness and help upgrade its industrial production.
ii. Protected Tariff Lines: 25% of tariff lines i.e., 1760 TLs have been placed in the protected list. 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.
iii. Safeguard Measures: Safeguard Measures (SGM) are invoked to temporarily restrict imports of a product which cause injury or threaten to cause injury to the domestic industry. The existing SGM, in CPFTA were inadequate to address the concerns of the industry and have lapsed since these could only be invoked during the transition period i.e. 2007-12. Following modifications have been incorporated in the Agreement:
a. In Phase-I SGM were limited to the absolute increase in imports, but now can be invoked on relative increase in imports as well.
b. The transition period in has been increased to 10 years for CAT-I and 8 years for the remaining tracks, which in relation to Tariff Reduction Modality will be 15 years for CAT-II & 23 years for CAT-III.
c. SGMs can be applied for 3 years, and can be extended to an additional 2 years. This has not been granted to any other country by China.
d. In Phase-I SGM, injury to the industry had to be proven but an emergency measure of 180 days can be imposed in Phase-II without proving injury.
iv. Balance of Payment: This provision has been introduced in the Agreement as such measures can help to forestall the imminent threat of a serious decline in monetary reserves.
v. Electronic Data Exchange: In order to avoid misdeclaration and under-invoicing of imports from China, a system of Electronic Data Exchange has been enforced on the trade taking place under the framework of the Free Trade Agreement