Reduction in tariffs: MoC expresses serious reservations

The Ministry of Commerce (MoC) has reportedly opposed blindly lowering of tariffs as unilateral reduction in tariffs across the board on Most Favoured Nation (MFN) basis would leave Pakistan with little to bargain, sources in EDB told Business Recorder.
These reservations were expressed by the MoC at a meeting of subcommittee constituted by the ECC on tariffs reform exercise, presided over by the Additional Secretary, Commerce, Shahid Rahim Sheikh. The meeting was attended by representatives of Federal Board of Revenue (FBR), National Tariff Commission (NTC) and EDB. The participants discussed all relevant issues in detail in the light of arguments of different stakeholders.
The meeting decided to further strengthen the role of EDB, as the organisation is considered well equipped to undertake the role of development of engineering sector in Pakistan. The representative of the EDB said that the regulatory role of the organisation, a subsidiary of Ministry of Industries (MoI), is not self-assumed but rather given by Federal Board of Revenue (FBR) since it does not have the capacity to execute it. FBR is well within its wisdom to assign this job to EDB, he added.
The subcommittee acknowledged that protection through tariff is essentially the role of the Ministry of Commerce/National Tariff Commission. Hence, there is a need to strengthen the capacity of NTC so that its role can be actualised. The subcommittee also refused to support the recommendation of the consultant to entirely do away with the concessionary regime for the manufacturing sector, since the move would have a strong negative impact on local manufacturing and significant loss of revenue.
The Commerce Ministry argued that higher tariffs on some products would not be positive as they, in a way, act as a selling point for Pakistani products. Higher tariffs in FTA/PTA negotiations are used as a bargaining chip to get better market access for Pakistani products. Unilaterally lowering of tariffs across the board on MFN basis would leave Pakistan with nothing to bargain with. No country would be interested in FTA with Pakistan since there would be little or no tariff preference that Pakistan could offer.
The subcommittee has recommended that structure should be finalised keeping the tariff structure in the region, as well as that of competing economies in view. The MoI and EDB extended full support to the Planning Commission in bringing down the general maximum tariff rate to 25 percent from current 32.5 percent.
The FBR argued that by reducing existing tariffs on approximately 400 items, which were increased from 25 percent and 20 percent respectively in 2008 to their original position, would bring the general maximum tariff back to 25 percent.