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Pakistan, China FTA review: MoI, industrialists begin consultations

Business Recorder, Pakistan

Pakistan, China FTA review: MoI, industrialists begin consultations

30 August 2012

By Mushtaq Ghumman

Ministry of Industries (MoI) has started consulting with industrial representatives ahead of talks between Pakistan and China as part of the process to review Free Trade Agreement (FTA). Both countries signed FTA on November 24, 2006 which according to business circles has hurt some local industries very badly.

In a meeting chaired by Ms Shaista Sohail, Joint Secretary MoI, representatives of Paper & Board industry were very vocal in saying that original FTA was signed without taking the industry on board as a result Pakistan’s industry suffered because of major acts of commission and omission.

Citing an example they said that HS Code 4810.9200 was added to the concession list of imports from China. As the negotiators had little or no idea of Pakistan’s Paper & Board industry and this folly resulted in allowing 92 percent of countries demand be fulfilled through imports from China. Resultantly, billions of rupee investment in the local industry remained un-utilised.

Raja Amer Iqbal, Senior Vice President of Rawalpindi Chamber of Commerce and Industry (RCCI) said this review provided a unique opportunity for Pakistan to revise such follies. Pakistan is passing through its worst phase on the economic front. Challenges including energy shortages, alarming law and order situation and the tailspin of the rupee value have rendered thousands of industries uncompetitive. With industries being closed unemployment is rising to the highest level whereas law and order situation is further deteriorating.

"This is the time to get bad decisions reversed through negotiations with China. They will understand our industries’ situations and they will be forthcoming in supporting us. It is the responsibility of our negotiators to get more favourable terms from the Chinese trade negotiators. Pakistan’s industry is not asking for aid, but favourable trading terms," commented one the participants.

Abdul Waheed Khan, Director General PAMA said that 28 percent increase in trade between the two countries in the last five years does not reflect any contribution made by the FTA. This could have been achieved regardless of the FTA. The Chinese government reports exports of $12 billion to Pakistan. On the other hand, the Pakistan trade figures with China report only $3 billion during the same period. This huge under invoicing is killing the Pakistani industry. It is the responsibility of the government to check the trend.

Trade negotiations are meaningless if the situation is not reversed. Pakistan’s auto industry, especially the two-three wheelers sector is getting badly hurt because of the situation. "Our vendor industry is being denied of its own market," he said. "Imports of parts at ridiculously low prices, even at rates lower then the raw material leave little or no room for our industry", he added.

Representative of FPCCI was very vocal in demanding business opportunities for the Pakistani industry in China. He was of the view that it was the principal responsibility of the Ministry of Commerce to get market access for Pakistan’s industry. On the contrary they have given away Pakistan’s own market to other countries. FTAs were signed without any homework, planning and thought process. As a result Pakistan’s industry has not gained any market access and has lost its own market to foreign manufacturers and traders.

"The industry is being reduced to a trading economy," he said adding that already many industries have closed down. He mentioned footwear industry as one of the industry that has suffered major hemorrhage at the hands of cheap Chinese imports. Government representatives of Khyber-Pakhtunkhwa and Punjab were also present in the meeting. They urged that market access for Pakistan industry should be sought and this was hardly the time to allow more excess to Pakistani market for Chinese products. Stone Development Corporation also participated in the meeting and demanded a tariff regime that helped Pakistani marble exports and a check on Chinese imports. It was decided that sector specific meetings will be convened to focus on the issue and to get data on the injury caused to local industry as a result of cheap and under invoiced Chinese imports.