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ISLAMABAD: Pakistan and Gulf Cooperation Council (GCC) are said to have agreed on signing of Free Trade Agreements (FTA) for which tariff reduction modalities have been divided into five categories, well informed sources told Business Recorder.

Sharing the details, the sources said, during the third round of Pak-GCC FTA negotiations held from May 30 to June 2, 2022, following modalities for tariff reduction have been agreed upon: category (A): zero duty from the first day of entry into force of the agreement; category (B): zero duty after 5 years of entry into force of the agreement; category (C): zero duty after 10 years of entry into force of the agreement; category (D): zero duty after 15 years of entry into force of the agreement; category (F): products in this category should not exceed 5 percent of tariff lines and are subject to tariff reduction by 50 percent and category (E)- excluded from liberalization.

According to sources, researchers at MoC have prepared a list of 2,096 tariff lines at HS 8 which is 28 percent of total tariff lines, whereas, agreed modalities is to keep exclusion list at 20 percent, i.e. 1,497 tariff lines.

The Commerce Ministry, sources said, had sought comments from concerned ministries on which products protection was required and should be kept in exclusion list and the products which could be shifted to categories D and F, -five percent of tariff lines which was 369 tariff lines.

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The GCC, which consists of the UAE, Saudi Arabia, Qatar, Bahrain, Oman and Kuwait, was established under an agreement concluded on 25 May 1981 in Riyadh, Saudi Arabia. The GCC countries occupy most of the Arabian Peninsula and are known for their large reserves of crude oil and natural gas.

The GCC, at its Ministerial Council meeting in June 2004, agreed to consider the possibility of concluding a Framework Agreement on Economic Cooperation between the GCC States and Pakistan along with starting FTA negotiations. The Framework Agreement was signed in Islamabad in August 2004.

Pakistan’s exports to the GCC increased by $483.2 million while its imports from the GCC fell by $4.5 billion during the period 2017-2020.

PBC, in its report titled “potential for a Pakistan-GCC FTA” is part of the PBC’s Market Accesses Series 2022 recommended the government of Pakistan deferred signing of the proposed Pakistan-GCC FTA for the following reasons: (i) Pakistan is likely to continue to import ‘Mineral fuels (HS-27) in large quantities from the GCC regardless of the signing of the Proposed FTA. The GCC had a share of roughly 75.2 percent in Pakistan’s import of ‘Mineral fuels …’ (HS-27) from the world between 2017 & 2020; (ii) as part of a similar trade agreement, Pakistan offered a Margin of Preference (MOP) on import of palm oil from Malaysia as part of the Malaysia-Pakistan Closer Economic Partnership Agreement (MPCEPA).

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The same MOP had to be offered on palm oil imports when Pakistan signed the Indonesia–Pakistan Preferential Trade Agreement (IPPTA). What is important to note here is that Pakistan gets all its imports of palm oil from Malaysia and Indonesia and reducing tariffs only impact the FBR’s revenues; and (iii) tariffs in the GCC countries are in the range of zero to five percent, if Pakistani exporters are unable to increase market shares, the reasons are clearly other than tariff.

PBC was of the view that exports of ‘pharmaceutical products’ (HS-30), medical devices, sports goods including footballs, agricultural products, textiles and technology services etc. require special attention and a special package needs to be developed for these sectors.

PBC further stated that Pakistani government should incentivize the development of testing centres in Pakistan where compliance tests can be performed in a cost-effective manner which will improve the quality of Pakistani products to match international standards.

Pakistani government must facilitate exporters in terms of prompt and efficient customs clearances, subsidized freight charges for non-traditional products etc. Pakistan also needs to safeguard its local industry and ensure avoiding indirect imports of Chinese and Indian products via Dubai under an FTA, the PBC maintained.

Copyright Business Recorder, 2022

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