Pakistan ensures safety valve in BoP clause with China

Pakistan has ensured a safety valve in the balance of payments clause under the Free Trade Agreement (FTA) with China which would allow Pakistan to raise tariffs during periods of balance of payments difficulty, Business Recorder reported here on Wednesday.
According to the report an increase of 10 per cent in the protected list of Pakistan initially agreed during phase I of China Pakistan Free Trade Agreement (CPFTA) has now been raised to 25 per cent, which comes to around 1760 tariff lines and entails around 37 per cent of Pakistan’s imports from China. It was also reported that the 25 per cent increase includes a sensitive list of 1410 items (20 per cent) and a list of 350 items given Margin of Preference (MOP) on the applicable rates (5 per cent).

Under the FTA major protected industry include 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, or as the report highlights it to be Pakistan’s entire industry.

In Phase I of the CPFTA, 60 per cent of imports from China were given substantial concessions however with this new phase in motion Pakistan will liberalise another 7 per cent in the next 15 years as most of the concessions have been placed under a 15-year track. The 7 per cent will constitute of raw materials, machinery and intermediate items which are aimed at helping the domestic industry become more competitive and cost-effective.

Sources privy to the development also mentioned that China will be removing tariffs on 313 high priority tariff lines which constitute of over $8.7 billion of Pakistan global exports and $64 billion worth of Chinese global imports whereas, under the complete offer from China, over $19 billion of Pakistan’s exports will be covered to $1.6 trillion of Chinese global imports.

Currently, under the 313 tariff Pakistan’s exports only account for 2 per cent of China’s total imports however with the new concessions Pakistan is likely to increase its market share to over 10 per cent to a tune of $6.5 billion per annum.

Moreover, the 313 tariff lines constitute of 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, and machineries etc.

With this new FTA in motion, around 95 per cent of tariff lines will actively become a part of the CPFTA framework and will, therefore, enable Electronic Data Exchange on these tariff lines which also constitute 95 per cent of the imports from China.