The business community has expressed serious reservations over Pak-China FTA Phase 2 terming it anti-industrialization.
Pakistan and China will sign the second phase of Free Trade Agreement in Beijing on 28th April.
Under the Free Trade Agreement, China has extended duty free access to Pakistan on three hundred and thirteen items. The agreement will help boost the exports of the country, besides increasing foreign exchange.
Saud Mahmood, Chairman SITE Taxation and Trade Policy, said FTA could prove anti industrialization as did the first phase, even with up to 30 percent RD, we have USD 15 billion trade deficit with China.
“China should buy Pakistani T-bills equivalent to its trade deficit with us to support Pakistani Rupee”, said Chairman SITE Taxation and Trade Policy.
China is known as the supplier of the world with huge current account surpluses with most trading partners. After the first phase of PAK China FTA, we had to impose up to 30% regulatory duty to save the local industry from closing down. Even after the imposition of 30% regulatory duty, trade deficit from China is over USD 15bn with Pakistan exporting under USD 3bn worth of goods to China, mostly minerals, agricultural products, and livestock.
It is extremely unlikely for Pakistan to benefit from the 2nd phase of Pak China FTA as Chinese imports of USD 2 trillion are either of raw materials or high-tech equipment. Pakistan does not have the industrial and technical base to produce high-tech equipment such as computers, ICs, telecommunication equipment & automobiles. Moreover, exports of minerals, live stock and agricultural products is not accelerated by FTAs as importing countries do not apply duties on raw materials.
In view of the above ground realities, it would be interesting to see in which areas Ministry of Commerce has envisioned growth of Pakistan’s exports to China. If exports to China are expected to grow to USD 6bn after the 2nd phase of FTA, an item wise break up in which exports are expected to jump should be shared with the industry for their comments.
In the absence of such a detailed effort duly endorsed by leading chambers, it seems that we are all set to shoot ourselves in the foot again.