Second phase of Pak-China FTA not at cost of local industry: FPCCI

KARACHI: Federation of Chambers of Commerce and Industry (FPCCI) has advised the government that the second phase of Pak-China Free Trade Agreement (FTA) should not be at the cost of local industry.

FPCCI President Engr. Daroo Khan Achakzai, while chairing session on Pak-China FTA, advised that Pakistan may enter into second phase of FTA with China but not at cost of closing our local industries and adversely affecting the economy at large.

He said first phase had enhanced Pakistan’s trade deficit with China to US$ 17 billion.

President FPCCI further added that Pakistan has already liberalized 60 percent of its trade with China, suggesting that Ministry of Commerce to take policy reforms for elimination of under-invoicing and settle to have agreements with China on removal of Sanitary and phytosanitary measures (SPS), Technical Barriers to Trade (TBT) and barriers other than tariffs.

During the interactive session, the participants expressed their serious concern over the signing of second phase of CPFTA without ensuring the elimination of weaknesses of first phase of CPFTA.

The participants said that considering the stances of several sub sectors industries like seafood, vegetable oil and leather products should also be considered to have zero rated export entry status like ASEAN so that enhancement of exports are contributed by these existing sub sectors of industries with available potential further to grow with the passage of time.

The participants also considered to protect the domestic industries of Chemical, steel, leather, plastic and poultry, in specific industries in SME in such a way that the effects of FTA do not adversely affect the present industry, already hostage of domestic supply constraints.

They said that time space, tariff reducing modalities, elimination of non tariff barriers should be rationalized in FTA in such a manner that circumstances surrounding the economies of FTA partners is fundamental to negotiate on non reciprocity basis due to huge difference in economic development levels of FTA partners.

The participants of the meeting also showed concern on non-implementation of Electronic Data Exchange, earlier agreed between the Customs of both side countries.

The participants also showed further concern on non documented data of at least 36 percent on account of reasons inclusive of continued reported under invoicing, which not only is making losses in custom collections but as well as is against fair practices of trade leading to unhealthy competition.

The participants also stressed on the negotiation to focus negotiating on win-win concluded safeguard measures, transfer of technology and required skills for smooth operation of negotiated FTA.

Moreover, the participants underlined the need of direct market access of Pakistan’s products in China; which presently allows import from Pakistan for sales in Chinese market through vendors, which have registered history of on rising trade disputes.

The existing trade through such intermediaries creates the burden of not only apprehensions but also generates non resolved disputes arising of such mode trades in between Pakistan and China.

The participants also stated that since already 60 percent trade of Pakistan from China is being conducted in major at Zero percent and in minor in between 0 to 5 percent, therefore further liberalization in these zero and 0-5 categories on import of intermediary and finished goods may not be preferred to be part of FTA.

The participant feared that economic growth of Pakistan closing to 3.7 percent during this year will further suffer due to addition of further trade liberalization and small and medium vulnerable SMEs may add to the closure and reduction of industrial economy of Pakistan.

The country needs employment as fundamental to the requirement of law and order, which may be assured to be preserved during negotiation of FTA as liberalization also costs employments for weaker economies.

The participants also suggested that China should also give concrete plan of relocating its labor intensive industries in SEZs of Pakistan and include Pakistan in the supply chain of its finish goods exports from Pakistan, example of which are countries like Vietnam & Cambodia doing so.

The participants also strongly suggested that Mutually Recognition Agreement for quality and quarantine inspections and standards be adopted to include meat and agriculture produce exports, which has identified potential of exports.

The meeting concluded that the second phase of CPFTA should be deferred for some period to analyze the benefits and losses and further analyze as what exactly went wrong in first phase negotiations concluding to development of huge trade deficit with China.

Pakistan should ask China to facilitate entry of significant export share from Pakistan, which demand of stakeholders in Pakistan appears to be realistic in view of rising deficit since first phase from 2.9 Billion USD to over 17 Billion USD.

Further this deficit number on exchange of electronic data may cross 20 Billion USD. The outcome of such negotiation should also take care of issues of balance of payments, which are also recognized by the multilateral negotiating mechanisms.

The participants also asked for free access and publication of negotiating draft with GoP on all proposed matrix and reasons thereof being considered to be negotiated in second phase of CPFTA.

The proposed draft on negotiation be provided with reasons of endeavoring win-win situation available with GoP negotiators in respect of phase-II negotiation of FTA with China with complete analysis as how the present and future of industries will be protected by fiscal incentives, through tariff rationalization and other measures deem necessary to keep the country further falling from the declining GDP growth.

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