Second phase of Pakistan-China Free Trade Agreement comes into effect

The second phase of Pakistan-China Free Trade Agreement (FTA-II) came into effect on Wednesday as the Federal Board of Revenue (FBR) has issued the Statutory Regulatory Orders (SRO) to implement the protocol agreed between the two countries.

The FTA-II with China in the first year, which would further enhance in next few years. According to the estimates of ministry of commerce, the FTA–II will provide the opportunity to Pakistan to increase its exports to China by $4-6 billion in next five years. “Alhumdulillah China Pakistan FTA Phase 2 becomes effective from yesterday. CPFTA will eliminate tariff on 313 tariff lines which will cover over $8.7 billion worth of Pakistan’s global exports and 90% of Chinese global imports. I would also like to thank my team at the Ministry of Commerce for playing a pivotal role in making this possible. This heralds a new dawn for Pakistani exports inshallah,” said Prime Minister’s Adviser for Commerce and Investment Abdul Razak Dawood on Twitter.

Pakistan and China had finalised the FTA-II in Beijing on April 28, 2019. Under the new FTA Pakistan had secured enhanced and deeper concessions on products of its export interests. The second phase of FTA was supposed to commence from the sixth year of agreement i.e. 2013, but was delayed as officials from both countries failed to reach an agreement despite meeting over 12 times. Talks on Phase-II began in 2011. The ministry of commerce and business community had expressed concerns over the first phase of the FTA, which was in China’s favour. The businessmen said that the first phase of FTA had provided more benefit to China and local manufacturers are facing huge losses due to the demand of products being imported from China.

Under the agreement, the Chinese government had agreed to immediately reduce duties to zero per cent on 313 tariff lines. New list included textile goods, leather, engineering, chemicals, furniture, auto parts, plastic, rubber, paper board, ceramic, glass, surgical instruments, footwear, wood, articles of stones, sea food, meat, tractors, home appliances etc.

The Federal Board of Revenue on Wednesday has issued the SRO 1640(I)/2019 dated Islamabad, the 31st December, 2019 to implement the protocol agreed between China and Pakistan. The Board in order to implement the agreed protocol, after thorough deliberations in consultation with Ministry of Commerce, transposed the Offer List and developed a Statutory Regulatory Order. The China Pakistan FTA Phase-II will operationalise vide SRO1640(I)/2019 dated Islamabad, the 31st December, 2019 from the start of the calendar year i.e. 01.01.2020 and shall supersede the old SRO 659(I)/2007 dated 30.06.2007.

The Tariff Elimination Schedule/ Offer List of Pakistan shared by Ministry is divided under the categories A0, A7, A15, MOP1, MOP2, C1 and C2. The Customs Duties in 3251 Tariff Lines in the A0 category will be eliminated entirely and such goods shall be free of customs duty from 01.01.2020. In the category A07 the duty structure will be tapered towards elimination from Year 2 to year 7 and in Category A15 the duty structure will be tapered towards elimination from Year 4 to year 15. In the Margin of Preference (MOP) there are two categories, in MOP1 the Customs Duties shall be reduced by 20% of the base rate on the date this protocol enters into force and in MOP2 the duty structure will be reduced 20% from the base rate in two years’ time. The Customs Duties on originating goods provided for in category C1 shall remain at base rates and in category C2 shall not be subject to any concession.