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Free Trade Agreement with Thailand may not benefit Pakistan

Express Tribune, Pakistan

Free Trade Agreement with Thailand may not benefit Pakistan

By Our Correspondent

15 January 2016

Lahore: Experts have urged the government to complete its homework before engaging into the Free Trade Agreement (FTA) with Thailand as, historically, FTAs have failed to usher favourable terms for Pakistan’s exports.

Several high potential export items received no concessions under the FTAs with China, Malaysia and Indonesia, prompting officials to question the agreements.

A study conducted by the Pakistan Business Council reveals that Pakistan’s top 50 high potential export items represent a total trade potential of $2.8 billion for the Thailand market. It is another matter, study noted, that the potential was not exploited by Pakistan’s exporters as about 38% of these high potential items are already tariff exempted by Thailand. Therefore, in practice, the FTA may not bring much benefit to Pakistan.

The study shows that following the FTA, Pakistan’s imports from Thailand will be elevated to $1.71 billion whereas Pakistan exports will increase to a paltry $160 million, pushing the trade deficit to $1.54 billion. Pakistan’s export to Thailand without FTA have hovered around $109-118 million in the last four years.

Industry experts stressed that the National Tariff Commission (NTC) lacks the institutional capacity to fulfil its myriad responsibilities, such as setting safeguard measures, performing trade research and tariff rationalisation, and therefore it will be unable to address issues pertaining to the Pakistan-Thailand FTA.

Under the simulation study conducted by PBC, Pakistan’s highest growth items are apparel and home textile articles but their actual export value will only grow from current $1.4 million to $6.1 million.

The study further reveals that Thailand’s high potential exports to Pakistan are not capital goods, but consumer goods, making the potential trade deficit that will come about after the FTA harder to justify. It may impact the domestic consumer industry more severely the study warned.

They said that signing a FTA as such is not a bad idea if the Pakistani planners negotiate it prudently. However, historically, it seems that either they have failed to ask for concessions or did not press the matter hard enough. This is evident from their failure to secure concession in high potential exports from Malaysia, China and Indonesia, where other countries have either gotten zero or very low duties.