One must wonder what dictionaries policymakers are using since clearly their understanding of basic terms is so different from those widely accepted. In the Pakistan China FTA negotiations, what is being hailed as a “major development” and a “breakthrough” appears to be little more than a nod towards diplomacy.
The second phase of the FTA was supposed to be implemented in 2014, for which negotiations started in 2011. Since then, the negotiations have been stalled with Pakistan repeatedly requesting for better access. Finally, China has agreed to address concerns. So after more than 6 years of pleading, what Pakistan is hailing with enthusiasm is China willing to consider improved access to its $1.6 trillion market of which Pakistan’s share is less than $2 billion.
China is the biggest importer of cotton and it derivatives in the world. So much so that nearly half of the total global export of cotton yarn is imported by China. The bulk of Pakistan’s exports to China consist of cotton and its derivatives, the biggest export being cotton yarn. Currently less than a quarter of China’s imports of cotton yarn originate from Pakistan which is hardly surprising since Vietnam enjoys of 0.4 percent under the ASEAN FTA, whereas tariff imposed on Pakistan is 3.7 percent.
After cotton, rice is an important export to China for which Pakistan receives no preferential treatment whatsoever.
The average tariff imposed on Pakistan’s rice exports into China is 65 percent whereas ASEAN countries Thailand’s and Vietnam’s rice imports have an average tariff of 33.7 percent levied on them.
Pakistan has shared a list of 70 items that constitute of more than 80 percent of its exports to China. Allegedly, China has agreed to consider these items favourably. Consider this example: China offers 50 percent tariff reduction on Pakistan’s current exports and as result, tariff on cotton yarn imports from Pakistan get decreased to 1.4 percent.
This reduction will do little to increase Pakistan’s market access because cotton yarn from Vietnam will still be facing lower tariffs.
Pakistan needs to analyze the tariff preferences offered to its competitors and receive a firm quantitative commitment from China. Otherwise, the jubilations at tariff reductions would be a farce.
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