LAHORE – Pakistan has potential of enhancing its exports to China by three hundred percent to the tune of $3.6 billion from the existing level of $1.2 billion in the current financial year by just securing zero-tariff access in renegotiation of the free trade agreement (FTA) second phase with China for few products, mainly textile, rice, leather and carpet.
Industry experts pointed out multiple flaws in the existing bilateral trade accord, signed a decade ago, that skewed benefits mostly in favour of China.
Noted economist Dr Salman Shah said that Pakistan’s trade deficit with China has further widened to $9.7 billion in FY18. China, the largest trade partner of Pakistan, has further increased its exports to $11.45b; an increase of $1.38b compared to FY17. However, exports to China increased by just $120 million to $1.74b, creating a trade gap of $9.7b which accounts for over 30 percent of the overall trade deficit of the country.
Saarc Chamber of Commerce and Industry senior vice president Ifitkhar Malik observed that following the FTA, Pakistan’s trade deficit with China markedly widened, surging from $2.9 billion in 2006-7 to $12.7 billion in 2016-17 out of Pakistan’s total exports of $22 billion.
He said that Pakistan could not use the concessions granted by China under the first phase, as it only exported 255 tariff lines and an average export value was around $550, which was around 3.5 percent of the total tariff lines of 7,550 on which China granted concessions to Pakistan.
Iftikhar Malik observed that China’s demand for agricultural products is now increasing, as its imports witnessed massive growth with wheat import increasing by 67.3 percent, soybeans by 20 percent and beef by 14 percent. He said that exports of fruits can get a boost as thousands of tons of fruits can be exported to China.
The UBG chairman said that China is the world’s largest importer of agricultural products and we have to grab our due share through the revisit of FTA between two countries which is mandatory for us.
Another noted financial analyst Sohail Ahmed said that among overall exports to China, cotton & yarn is valued around $940m (51 percent of total exports) followed by metals which are 17 percent of total. While other top commodities are cereals, leather, fisheries, fruits, construction and allied material and minerals.
Rice Exporters Association of Pakistan (REAP) Senior Vice Chairman Ali Hussam Asghar observed that rice export to China is on decline due to tariff barrier. However, it will give a big boost if Pakistan can also get duty free benefit in free trade agreement like ASEAN Countries. He requested the new government of PTI to take up this matter with Chinese Authorities.
He said that Pakistani is one of best basmati and Irri rice producer in the world and being a neighbor country China can import rice at cheap rates. Ali Hussam said that Pakistani rice exporters are putting their untiring efforts towards the growth of Pakistan’s economy and looking new markets to enhance the rice exports to cross $2 billion by end of this fiscal year. He said that Pakistani rice exporters are updating their rice mills to meet the required standards of China and other countries to increase rice exports in general.
Reap senior vice chairman stated that exports of semi-milled or wholly-milled rice to China could earn $1.15 billion on zero-tariff market access in addition to the current $195 million. This would be apart from broken rice that possesses an additional export potential of $200 million.
Pakistan Hosiery Manufacturers Association chairman Adil Butt said that Pakistan and China had agreed to revise the FTA by the December-end 2015, but Chinese authorities were unwilling to accept Pakistan’s demand to revive preferential treatment for exportable products under the FTA’s second phase, which was to be implemented from Jan, 2014.
Pakistan’s key exports to China were raw materials and intermediate products, such as cotton yarn, woven fabric and grey fabric. Value-added products were missing despite the fact that the country’s key exportable garments were also included in the concessionary regime.
He said that Pakistan exports of boys’ trousers, breeches, cotton t-shirts and knitted or crocheted vests could fetch $450 million in addition to $545 million. Other products that hold potential for extra exports in zero-tariff regime include girls’ trousers, grain splits leather, t-shirts, paper and paper board, footwear, vegetable fats and oil and household articles. These products have been earning the country about $960 million now.
APTMA former chairman Gohar Ejaz has also sought government assistance to persuade China to establish a special credit line of $5 billion for new investments and joint ventures between manufacturers of both countries.
He said the facility should be provided by China under the pay-as-you-earn scheme on the buying-back basis to stimulate investment in exports from Pakistan.
He said that the Chinese local textiles and clothing market is projected to be worth $500 billion and Pakistani textile export constitutes a meagre 3 percent of their textile and clothing imports of $268 billion, indicating there is a huge opportunity there.
Pakistan Tanners Association chairman Agha Saidain observed that Pakistan is not benefiting from free trade agreement with China, as the leather industry is still paying around 9 per cent import duty on its export goods to China owing to non-implementation of zero-duty under FTA regime. With a view to enhance bilateral trade, Pakistan and China, around 11 years back, had signed an FTA under which both the countries decided to facilitate each others’ exporters, exempting duty on their export. He said that in first stage, import duty on Pakistani leather export to China was reduced to 9 per cent from 14 per cent but in second stage this 9 per cent duty was to be reduced to zero some six years ago, which is not being implemented so far, he complained.
Pakistan Poultry Association former chairman and LCCI former president Abdul Basit said that free trade agreements signed with Malaysia as well as China, without taking the real stakeholders onboard, are damaging the local poultry industry, as the imports of processed chicken products under FTA with Malaysia are subject to zero percent import duty and from China at 16 percent import duty. On the other hand, local processors are unable to export their products to these countries as they are absolutely uncompetitive owing to hosts of reasons.