News of FTA with China raises stir in Pak local industry

ISLAMABAD: The news that Pakistan is all set to finalise modalities for extending Free Trade Agreement (FTA) with China by March 2018 has raised alarm bells in local industry.

To assuage their fears Adviser to Prime Minister on Finance Affairs Miftah Ismail along with senior government officials met with the representatives of local industries on 15th March. In this meeting it was disclosed by Secretary Commerce Younas Dhaga that Pakistan would not liberalise 25% of its products in second phase of FTA with China. However, custom duties on all other products imported from China will be removed.

The ministry’s officials informed that majority of representatives of local industries have already been consulted before short-listing products to be liberalised with China. The local industry seemed dissatisfied with ministry’s half hearted consultations. They claimed that except for ministry’s officials no one has any idea as to which products would be protected and which would be liberalised.

The ministry is of the view that lingering negotiations on second phase of FTA has damaged Pakistan’s access into growing markets of China. The extended FTA will help Pakistan in improving its exports. However, neither private nor public sector seems to be clear as how much will be gained from enhanced market access and how much will be lost from extensive trade liberalisation with country like China.

The drive for protection of local industry is gaining ground. In order to protect its local industry even a country like USA has started imposing taxes at import stage besides re-negotiating their trade agreements like Nafta.

The improving infrastructure and power situation in Pakistan is likely to attract investment in industry. However, proposed expansion of FTA with China will remove incentive for fresh investments in local industry.

This will have serious implications for generating employment opportunities for Pakistan’s growing population besides widening trade deficit of the country. The worst hit will be those small industries and agriculture sector which are not represented by any lobby in Pakistan.