Pakistan losing Chinese market after Beijing’s trade deals

[Devil Soul]

Pakistan losing Chinese market after Beijing’s trade deals
Published: August 4, 2015
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PHOTO: AFP

ISLAMABAD: Pakistan is losing its margin of preference in the wake of free trade deals signed by China with different countries, especially the member states of Asean grouping, after a similar agreement with Pakistan.

The concern was raised on Monday at the start of the fifth round of negotiations for the second phase of the Pakistan-China Free Trade Agreement held to define accepted standards for trade between the two countries.

The talks are aimed at assessing the performance of economies of the two sides under the trade agreement, signed in 2006, and proposing necessary changes for mutual benefit.

Pakistan’s delegation for the three-day talks was headed by Ministry of Commerce Additional Secretary Robina Ather and comprised officials of the Federal Board of Revenue, Ministry of Industries, Ministry of Textile Industry and Ministry of National Food Security and Research.

Read: Pak-China trade increased to $12 billion, says Weidong

The Chinese team was led by Yao Wenliang, Deputy Director General of the Ministry of Commerce. Other delegates included officials from the Ministry of Industry and Information Technology, Ministry of Finance, Ministry of Agriculture and departments of customs and quality supervision.

An official of the commerce ministry said China had negotiated low tariffs with the nations it had inked FTAs after Pakistan and the ministry was now also seeking to revise the previous deal with Beijing with further tariff cuts.

On the first day, the two sides discussed diverse issues such as tariff reduction modalities, trade in services and enhancing cooperation for investment in different fields. They also talked about sanitary and phytosanitary rules and technical barriers to trade, electronic data sharing and customs-related matters. Other obstacles to trade also came up for review.

Pakistan underlined the need of boosting exports to China by encouraging all sectors that fell within the purview of FTA and sought to enhance facilities and concessions on high value-added products.

Talking to The Express Tribune, Pakistan’s lead negotiator Robina Ather said the two countries had already agreed to revise tariff modalities according to which Pakistan would not offer China all those concessions that would be provided by the latter.

She said it would also not be necessary for Pakistan to give concessions in the areas where it had given its consent in the previous FTA. Apart from this, Pakistan can withdraw the concessions in certain sectors offered previously.

According to her, there was zero tariff on certain Pakistani commodities but the facility could not be utilised and could be replaced with a new one comprising products that have a good potential for exports to China.

Earlier, in the fourth round of talks, the two countries made a big headway in the banking sector and agreed to ease the conditions for opening bank branches in each other’s territory.

For setting up a branch, the asset requirement will be reduced to $15 billion from $20 billion for all Pakistani banks at the end of the year prior to the submission of an application.

Read: ‘CPEC will strengthen trade and investment’

These banks can also run their operations in Chinese currency renminbi after one year of opening in China, down from the previous condition of three years. The requirement of being profitable for two consecutive years prior to the application has also been removed.

Published in The Express Tribune, August 4th, 2015.

 

[RazorMC]

Correct me if I'm wrong, but doesn;t the FTA heavily favour China?

 

[Nothing]

It is, and that is case with almost any country when they entered into FTA with china.
Many Asean countries had already gain significant technological expertise to became hi-tech industrial hub so they have lees to lose.
But for Pakistan or BD or India , we mostly have small industries (10-100 ) employees with less technical expertise and less investments.
Those people can't compete with well established Chinese manufacturing power house. In Pakistan these small industries provide jobs to illiterate/semi-literate people from poor to lower middle class. FTA is disaster for them.
I personally knows Pakistani businessman who told that their china crockery business lost everything after FTA. There are many small toys manufacturer as well other small businesses lost all after FTA.

Keep me wondering Pakistan can have good relation with China without FTA , then why GOP did this without supporting their home grown industries first.

Friendship and diplomatic and defense relations are at one place but at the end people should think about their businesses and workers first. Below image says everything. If you look closely with import items most of them can be MADE in PAKISTAN with little or no support of GOP. Over the time quality will improve as well.

 

[Sarjen29]

Correct me if I'm wrong, but doesn;t the FTA heavily favour China?

yes

 

[Thəorətic Muslim]

Correct me if I'm wrong, but doesn;t the FTA heavily favour China?

The Labor forces are increasing the wages in China, add to that the country is transitioning into manufacturing of more complex goods.

It was hoped that the FTA between the nations would allow for China to offload it's textile and low level manufacturing industries to Pakistan, but that hasn't worked out so far.

Pakistan's own textiles industry is producing hardly 50% of capacity due to the load-shedding.

But the FTA is failed due to a variety of factors:

1. Pakistani Businesses were never considered a party to the process
2. Concessions to Pakistan never came out to be competitive as compared to third parties. Pakistani products have no advantage in the Chinese market.
3. Majority of Pakistani goods were never part of the FTA for 0% tariff, in products that Pakistan had a comparable advantage producing. ASEAN nations have better leverage compared to Pakistan.
4. Failed Pakistani Marketing of products lead to only less than 5% use of the FTA.
5. Pakistan gave more favorable concessions to China, that too on industries that employ the vast majority of Pakistan's Labor force; Agriculture, Cement, Chemicals, Fertilizers, & Textiles.
6. Pakistan's electricity deficiency.

What Pakistan Gained:

1. Chemicals, Electronics, Machinery, & Raw Materials
2. Cheap Chinese products became even cheaper and flooded the Pakistani market devastating the local industry.

China is Pakistan's 3rd largest export market, while Pakistan is China's 56th market. After the FTA China rose to the 2nd source of Pakistan's imports, while Pakistan's position vis a vis China went down.

Pakistan's GDP compared to China is hardly 1%. It was stupid to even consider the one-sided FTA.

Cause in point Pakistan's inability to create a policy that looks onto it's own National Interests will in the end only kill it. ALLAH loves Pakistan a lot in my opinion. The stupid remarks by Pakistani Politicians, Military, and population that "China's enemies are Pakistan's" leave a sour taste in the mouths of nations in the Asian theater, ie Japan, that have helped provide support to Pakistan in it's early years.

Until Pakistan's leaders decide that enemies should be kept closer than friends,

The entire FTA needs to be adjusted.

 

[Uzair Shafiq [Босс]]

China LOL
It's using us just like USA did -.- 10 years later ''we're going to hate china"

 

[Hyde]

Whenever I read such news it reminds me about real life joke of my uncle.

He once went to Pakistan and asked a price of something.. The shopkeeper told him the price and uncle said.. Is it an imported product?

The shopkeeper replied oh no sir this is not imported product.. It's from China

So he asked is Chinese product not called imported? And he said no no it's from China.. It's not a imported product as if import only means products purchased from nations other than China.

 

[Dhanush d]

This is the reason why India does not have a FTA with china despite huge trade with china. Nobody can compete with china in manufacturing. Strangely though , pakistan usually say they cannot trade with india as it would affect their local industry(as one of the factors) , However they are happy to let the chinese flood the market . Now would the CPEC help pakistan in creating more favorable trade with china ? Honestly this point never comes up in any CPEC threads . Aren't you guys worried about chinese taking over your local industries ? . I am not trying to scaremonger about the CPEC ,but it seems nobody even bothers to discuss such situations.