China, Pak set to re-initiate stalled crucial talks for FTA-II on Dec 5-7

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Shahrukh Syed

Islamabad—After a long pause, Beijing has agreed to re-initiate the much- awaited talks on Free Trade Agreement (FTA) Phase-II with Pakistan and to this effect, both countries to hold crucial parleys for two days from December 5 in Islamabad, a senior official of commerce ministry privy to the development told Pakistan Observer.
Earlier Pakistan wanted the non-reciprocal tariff concessions from China in phase-II to compensate the loss in trade the country is suffering on account of existing FTA-I. However, China had earlier blatantly refused to extend the one sided tariff concessions owing to which talks for FTA-II got stalled.
Beijing had assured Pakistan’s authorities concerned that it will extend unilateral tariff concessions regime to Pakistan under phase II of China-Pakistan FTA to balance the trade going on under FTA-I which is heavily tilted towards China.
The Chinese authorities later backed out from its earlier stance and instead asked Pakistan to further liberalize its tariff regime by up to 90pc. This had really irked the authorities in Islamabad as Pakistan in first phase of FTA had reduced the tariff on 35pc items to zero per cent. Now, Beijing wants Pakistan to further liberalize its tariff regime by up to 90pc.
According to the trade volume between the two countries, the imports from China stands at $9 billion while Pakistan’s exports to China stand at $2 billion and the trade balance is in favour of China.
However, the sources also claimed saying as domestic industries are at risk of being wiped out due to dumping of cheap Chinese products, Pakistan has offered to eliminate duties only on half of the total product lines in the second phase of the free trade agreement (FTA) instead of 90pc under the original plan.
More interestingly, Beijing has expressed its annoyance over the regulatory duty (RD) on Chinese products imposed by authorities saying that the said initiative is tantamount to violation of the existing China Pakistan Free Trade Agreement (CPFTA).
China has shown its annoyance over imposition of regulatory duty on products being exported to Pakistan terming that it is inconsistent to the bilateral trade agreement and requested Pakistan to erase the said duty, this has been revealed in the minutes of sixth meeting of second phase of China-Pakistan FTA talks held in Beijing.
Pakistan, however, clarified in the said meeting that regulatory duty has been imposed on MFN basis arguing that comparative advantage still exists for Chinese imports vis-à-vis others. The Pakistan authorities involved in the talks tried to satisfy Chinese counterparts saying that regulatory duty is no more in respect of HS 85171210 covering the 80pc of total import value from China during the fiscal 2014-15, for 255 tariff lines taken up by Chinese side. And Pakistan’s authorities in the meeting also argued that regulatory duty imposed on Chinese products is not violative of Article-9 of China Pakistan Free Trade Agreement and agreed to provide further legal information regarding the duty to address Chinese concerns.
However, both sides are satisfied by the progress made by China Customs and Pakistan Customs on establishing Electronic Data Exchange System under CPFTA and vowed that the system will start running on July 1, 2016.
The minutes also reveal that Pakistan and China have also developed the differences on the tariff reduction modality. Pakistan based on the thorough data analysis and extensive stakeholders’ consultations, the exclusion percentage of products of Pakistan have to be 20pc of the total tariff lines. However, China refused to subscribe the version of Pakistan rather Beijing insisted that the exclusion percentage of tariff lines should be no more than 10pc as per the consensus reached by both sides in the phase 1 of China Pakistan Free Trade agreement.