PKONWEB Report – The recently signed China Pakistan Free Trade Agreement-II (CPFTA) would see Pakistan getting $6.5 billion annual share of total Chinese imports of $64 billion.
China and Pakistan (iron brothers and CPEC partners) have an annual trade volume of about $15 billion, of which Chinese exports to Pakistan are estimated at around $13 billion.
The free trade deal step-up comes amid Beijing’s nod to carry out bilateral trade with Islamabad in the Chinese yuan instead of the U.S. dollar- to help ease the South Asian ally’s financial and economic woes.
The central State Bank of Pakistan (SBP) has already declared Yuan as an approved foreign exchange for all purposes in the country.
Pakistan would get the same status as has been given to the Association of South East Asian Nations (ASEAN) countries for exploiting the entire 313 duty free tariff lines provided by China to access its market.
The unprecedented Chinese concession, officials and economists said, would go a long way in addressing Islamabad’s massive 87-percent trade deficit with Beijing and reducing pressure on Pakistan’s depleting foreign currency reserves.
“The agreement is part of practical steps being taken [by China] to support our [foreign] currency [reserves],” Pakistani Information Minister Fawad Chaudhry said in November.
He told reporters in Islamabad the “historic” deal was concluded during Prime Minister Imran Khan’s four-day official visit to Beijing last year.
Pakistan had to face trade deficit with China after the latter signed FTA with ASIAN countries in 2010-11. However, now the duty-free export of 313 tariff lines provided a huge opportunity to Pakistan to decrease trade deficit with China, said Advisor to the Prime Minister on Commerce Abdul Razak Dawood on Tuesday.
According to him, Vietnam increased its exports to China after signing of the China–ASEAN FTA. The new FTA with China would turn around Pakistan’s economy, particularly export-based industry, he said.
“We want to increase our exports to China and also bring the Chinese investment to Pakistan.”
Razak said China wanted to relocate its industry in other countries and the government desired to get maximum Chinese industrial units shifted to Pakistan.
“We missed the first phase 10 ten years ago when China shifted its industry mostly to ASEAN countries, specially Vietnam and Malaysia.” Now in the second phase, China wanted to shift the garments, leather and home appliances industry, he added.
Pakistan seeks to export to its ‘all-weather’ friend China key products like textiles, leather, engineering goods, electronics, plastics, sea food, apparel, foot ware and jewelry under the 313 tariff lines.
“We successfully negotiated and finalized terms and conditions to safeguard the local industry and get a 15 year window to gradually open the some potential areas of local industry for trade with China.”
Pakistan has succeeded in protecting its iron, steel, agriculture, plastic, ceramics and surgical goods from Chinese imports.
Razak said if any industry was hurt, Pakistan could get measures to protect the particular industrial unit.
Friendly countries including Saudi Arabia, China and the United Arab Emirates have extended balance of payment support to Pakistan- the gap is huge, warranting the need to go to the IMF to secure economic package.
An IMF delegation arrived in Pakistan Monday for a two-week visit.