Pakistan’s export earnings to increase by $500 million under CPFTA-II

ISLAMABAD: The government has announced that tariff concessions on goods under the revised free trade agreement with China will come into effect from Jan 1, 2020 after seven years of negotiations.

The protocol to amend the China-Pakistan Free Trade Agreement (CPFTA) has entered into force from Dec 1 through an official notification. In April, both countries have already signed a memorandum of understanding in this regard.

As per agreement, the CPFTA-II will immediately eliminate tariff on 313 tariff lines of Pakistan’s export interest, giving treatment to Pakistan’s exports on a par with countries of Association of South East Asian Nations (Asean).

These 313 tariff lines covering over $8.7 billion worth of Pakistan’s global export and $64bn of worth of Chinese global imports. Moreover, this will result in 75pc of total trade liberalisation for Pakistan in terms of tariff lines and 92pc in terms of trade volume.

The Commerce Division estimated that the country’s export earnings could increase by $500 million within 18 months after getting duty exemptions on these 313 tariff lines.

The duty exemptions is not limited to textile goods, but also include leather, engineering, chemicals, furniture, auto parts, plastic, rubber, paper board, ceramic, glass, surgical instruments, footwear, wood, articles of stones, sea food, meat, tractors, home appliances etc.

Under the agreement, Pakistan will reduce duty to zero on 75pc of total tariff lines in 15 years, while China will do the same in a period of 10 years. During this period, China will bring down duty to zero per cent on around 2,000-2,500 tariff lines for Pakistan.

The FTA between Pakistan and China covers nearly 7,000 tariff lines at the eight-digit level of the HS code. Both sides had already reduced tariffs on almost 36pc of the tariff lines to zero during first three years of CPFTA-I.

Further analysis shows the commerce division has offered to China to reduce duties to zero on 6,000 tariff lines while protection will be provided only to the remaining 1,120 tariff lines, mostly textile products.

The duties will be brought down to zero in a period of 15 years in three phases. One-third of these tariff lines will be removed immediately, half of the remaining will be exempted from duties in the next five to seven years while the rest will be eliminated within 15 years.