TUESDAY AUGUST 30: Controlling import & export: ECC decides not to use non-tariff means

ISLAMABAD: The Economic Co-ordination Committee (ECC) of the Cabinet has decided that non-tariff measures, including import licensing, will not be used to control imports and exports, official sources told Business Recorder.
The ECC, which met with Finance Minister Dr Abdul Hafeez Shaikh in the chair on August 23, 2011, also expressed serious concern over inclusion of top auto sector owners on the Board of Engineering Development Board (EDB), who could effectively control tariff determination policies of the government.
The Ministry of Commerce said that the ECC, in its meeting held on July 20, 2010 had constituted a committee, headed by the Deputy Chairman of Planning Commission, to review tariff structure for the entire industry, with a view to determining optimal tariff. Terms of reference (ToRs) of the committee were approved by the Deputy Chairman and thereafter the study was outsourced to external consultants by the Planning Commission.
The consultants presented their report titled "Pakistan Trade Policies; future directions" to the tariff reforms committee. The consultants made 28 recommendations to the members of the committee which include the following: (a) The general recommendation to lower the tariffs had been supported by all the committee members, provided it was done in a gradual and phased manner; (b) there was a near-consensus of the committee on the removal of regulatory duties except FBR which apprehended revenue loss by removal of regulatory duties; (c) regarding fifteen recommendations different committee members either expressed disagreement or raised concerns; (d) with reference to recommendations pertaining to subsidies, above normal protection and export taxes etc there was a need for greater economic justification. However, there was a general agreement on the need for detailed analysis and justification for continuing or otherwise of the practices concerned; and (e) there was general support for the recommendations pertaining to the need for better transparency and filling information gaps to ensure improved transparency and access to information.
The Ministry of Commerce, being the secretariat of the tariff reforms committee, proposed to the ECC to discuss the recommendations of the consultants' study in the presence of the chairman of the tariff reforms committee and its members. The sponsoring Ministry also proposed a way forward on the recommendations of consultants which included constitution of current four working groups/subcommittees for further deliberation and continuation of current cycle of the tariff reforms to be completed by June 2011.
Sources said that the ECC was briefed on the performance of the four subcommittees and it was noted that the subcommittees did not make any substantial progress. It was stressed that the subcommittees should work diligently and present their reports to the ECC early and the Deputy Chairman Planning Commission should play a leading role in this regard.
Another view was that there was no need for constituting subcommittee as the tariff rationalisation was not a onetime exercise, rather it was a huge and continuous exercise.
It was further explained that determination of tariff was the exclusive domain of the National Tariff Commission (NTC), while other institutions like Board of Investment (BoI), Engineering Development Board (EDB) etc were promotional agencies, which may give their opinion on tariff structure, but could not be vested with powers to determine tariff.
An apprehension was expressed about the competence and expertise of the NTC with regard to determination of tariff. It was stated that NTC, instead of determination of tariff on a particular sector of the economy, had determined tariff on industry-to-industry basis, which was not a wise decision. It was pointed out that NTC had technical capacity, but had not been allowed to play its effective role, which resulted in distortions in tariff sectors/industries.
It was also noted that tariff has come down considerably and all successive governments since 1988 played a role in this regard. It was stated that FBR had, in principle, agreed to lower tariff to 25 percent. It was also stated that WTO, of which Pakistan is a member, required member states to declare their tariff bounds and Pakistan had voluntarily done more than that. It was noted that Pakistan has lowest tariff regimes in the world.
Deputy Chairman Planning Commission Dr Nadeem-ul-Haq made a detailed presentation to the ECC on the issues involved. Major points raised in the presentation were as follows: (i) after 2007-08, tariff had increased and now it was hovering around 50 percent, besides having distortions; (ii) the exercise to remove regulatory duties had been initiated from the federal budget 2011-12 and RD on 392 items stands abolished; (iii) there should be a uniform rate to all importers including commercial importers; (iv) there should be a uniform rate of tariff across the board and the rate(s) proposed was 10 percent; (v) concessionary tariff should be available to all importers including commercial importers; (vi) there was need to reform auto and motorcycle sectors tariff and maximum for these sectors should be between 25 percent and 15 percent respectively during the next five years; (vii) textile and clothing tariff should not exceed 10 percent; (viii) the present " cost plus" and principle of cascading "should be explicitly abandoned forthwith"; (ix) the maximum overall tariff should not be more than 25 percent; and (x) there should be concessionary SROs relevant to the EDB for engineering sector. The SRO regime needs to be done away with.
During further discussions, concern was expressed about the monitoring role of the EDB, especially when it had the relevant industrialists on its Board, who could effectively control tariff determination policies of the government.
After detailed discussion on the summary of Commerce Ministry and the presentation made by the Deputy Chairman Planning Commission, the following general proposals were agreed: (a) non-tariff measurers including import licensing, will not be used to control imports and exports; (b) specific duties will not be used; (c) import tariffs would be low and uniform; (d) the government will aim to further bring all tariffs down; (e) tariff on individual products would be the same for all importers and trader importers; and (f) openness will be defining principle and works would be transparent.
The ECC took serious notice of limited progress by the four subcommittees and directed their heads to speed up their work. The Deputy Chairman of Planning Commission was directed to hold a detailed meeting of all concerned on urgent basis to deliberate on the issue and furnish a report to the Cabinet Secretary within two weeks. The ECC further directed that BoI, EDB and all other relevant institutions should provide essential support to the PC Deputy Chairman.