ISLAMABAD: Pakistan and Gulf Cooperation Council (GCC) are likely to sign the long-debated Free Trade Agreements (FTAs) during three-day parlays (26-28 September, 2023) in Riyadh (Saudi Arabia) initially on limited items, well informed sources told Business Recorder.
Pakistan’s delegation is expected to be headed by caretaker Minister for Commerce, Industries and Production, Gohar Ejaz, so that any major issue, if one emerges, during talks is sorted out immediately to reach a consensus. However, another view is that since SCO’s Trade Ministers Conference is also scheduled during the same dates, it is not confirmed if the Minister or Secretary Commerce will head delegation to Riyadh.
The sources said, Pakistan and GCC delegations have recently held negotiations in Islamabad, where general consensus was evolved that FTA must be signed even if its scope is limited so that the process which was started decades ago materializes. In parallel, Pakistan and United Arab Emirates (UAE) are also in talks on a trade pact.
An unsubstantiated information suggests that Crown Prince/Prime Minister of Saudi Arabia Muhammad Bin Salman has linked his October visit to Pakistan with signing of FTA between Pakistan and GCC during talks on September 26-28. Previously, both sides decided on tariff reduction modalities in five categories.
During the third round of Pak-GCC FTA negotiations held from May 30 to June 2, 2022, following modalities for tariff reduction were agreed: category (i): zero duty from the first day of entry into force of the agreement; category (ii): zero duty after 5 years of entry into force of the agreement; category (iii): zero duty after 10 years of entry into force of the agreement; category (iv): zero duty after 15 years of entry into force of the agreement; category (v): products in this category should not exceed 5 percent of tariff lines and are subject to tariff reduction by 50 percent and category (vi) excluded from liberalization.
According to sources, researchers at MoChad 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 product 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 accounted for 369 tariff lines.
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.
PBC, in its report titled “potential for a Pakistan-GCC FTA” is part of the PBC’s Market Accesses Series 2022 recommended that the government of Pakistan defers 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). 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.
Copyright Business Recorder, 2023