KARACHI:
Developing countries sign free trade agreements (FTAs) with trading partners mainly to increase exports and create better-paying jobs at home.
In Pakistan’s case, however, tariff revisions under FTAs have clearly not worked in its favour, numbers show. Pakistan has signed trade agreements with five countries, namely China, Indonesia, Malaysia, Sri Lanka and Mauritius.
“None of the major trade agreements Pakistan has signed have shown a significant increase in its exports. However, imports have shown a healthy increase post-all major FTAs signed by Pakistan,” according to an assessment of trade agreements carried out by the Pakistan Business Council (PBC), an advocacy platform consisting of 47 of Pakistan’s largest businesses.
Pakistan had a trade deficit with China, Malaysia and Indonesia when it signed FTAs with them in 2006, 2008 and 2013, respectively. Its trade balance was still in negative with these countries at the end of 2014, data shows.
However, Pakistan has managed to maintain a trade surplus – albeit a small one – with Sri Lanka ($217 million) and Mauritius ($21.3 million) in post-FTA years. With the exception of China, none of these countries was among Pakistan’s top-five import and/or export partners at the end of 2014. As for China, it became Pakistan’s largest import partner, leaving behind Saudi Arabia and the United Arab Emirates, in the post-FTA years.
Read: PBC’s report on Pakistan-Indonesia trade
China’s share in Pakistan’s imports was less than 12% in 2009, but increased to more than one-fifth of its total imports at the end of 2014. China held a 5.6% share in Pakistan’s exports in 2009, which increased to 9.1% in 2014.
So what does the change show?
In its 2013 study on China-Pakistan trade partnership in the post-FTA era, the PBC found that Pakistan “appeared to have failed to benefit fully” from the agreement. The study said it was due to either Pakistani businesses were not part of the FTA negotiations or the Pakistani negotiators simply lacked the requisite information to negotiate the agreement.
In a separate assessment of the Malaysia-Pakistan FTA that was published earlier this week, PBC researchers noted that Pakistan’s exports to Malaysia have only “marginally increased” since the implementation of the FTA back in 2008.
“One reason for this failure lies in the fact that the items which have the highest potential for exports are either not part of Malaysia’s concession list or (where they are a part) competitors enjoy better tariff rates than Pakistan,” they said. Contrarily, Malaysia’s FTAs with India and China have tariffs that are lower than those in its FTA with Pakistan, putting Pakistani exports at a clear disadvantage.
Trade statistics paint a similarly gloomy picture in the case of Indonesia as well. Pakistan’s exports to Indonesia in 2014 were less than its exports in the preceding year, although Pakistan had signed a preferential trade agreement (PTA) with Indonesia in 2013.
In contrast, Indonesia’s exports to Pakistan surged 74.4% over the same year. Pakistan granted it duty preference for palm oil imports, doubling their value to $1.4 billion in a year. The PBC believes Pakistan failed to extract “any significant concessions” from its PTA with Indonesia.
One of the reasons Pakistan’s various trade agreements have not achieved the desired results is the lack of involvement of the Pakistani business community in the drafting of such agreements, according to the PBC.
Read: Data-sharing system planned to tackle misreporting
It says many local manufacturers and exporters are simply unaware of the exportable items that are part of the zero per cent tariff track in these FTAs.
“The government needs to ensure that the focus (in FTAs) is not only on concessions for agriculture-based exports, but that the value-added manufacturing sector has access to markets that allow it to develop critical mass,” it added.
The writer is a staff correspondent
Published in The Express Tribune, August 10th, 2015.
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KARACHI:
The influx of Chinese steel in the country is hurting the local industry, lamented an official, adding that the widening price difference is also causing imports to rise.
Apart from the private sector, Pakistan Steel Mills (PSM) – the only integrated steel mill in Pakistan – is also facing a stiff challenge due to Chinese imports.
“The PSM is finding it very difficult to compete in the current situation because the cheap imported steel is hurting its market just because of the price difference,” a PSM official told
The Express Tribune.
Although, PSM is not producing billets – a thick steel bar that serves as a basic raw-material for different steel products – these days, it has been facing problems in selling its products owing to its higher cost of production.
According to industry officials, since January, over 100,000 tons of steel billets and hot-rolled coils have been imported from China at prices that are dramatically decreasing month after month.
This is due to the difference of over Rs6,000 between locally produced billets and the imported ones. Current steel billet prices of PSM range between Rs67,000-68,000 per ton including sales tax while the price of Chinese billets after duties and taxes at today’s prices are in the range of Rs60,000-62,000.
As the Chinese economy slows down and domestic consumption drops, the world’s largest steel manufacturing nation has a massive oversupply problem. Over the past few months, cheap steel products from China have flooded the domestic markets due to subsidies on electricity and rebates on exports provided by the Chinese government to manufacturers.
Local steel makers say that Chinese manufacturers have resorted to dump their steel products in other countries by relying on government subsidies, tariff concessions through Free Trade Agreement (FTA) and marginal cost pricing mechanisms.
The two main products manufactured by PSM are steel billets and steel hot rolled coils. In a commodity product such as steel billets and coils, margins are usually thin and with price differentials of Rs6,000 per ton, PSM is facing problems in finding buyers.
Since cheap Chinese steel imports are poised to win a larger market share, the demand for PSM products is expected to decline – leaving its management once again with cash flow issues and having to go back to the begging bowl for further handouts from the government.
Countries such as Egypt, Vietnam, Mexico, Brazil, US and India have countered this threat through imposing counter-veiling duties, regulatory duties and other non-tariff barriers to protect their local steel industry. Due to concessions given through the Free Trade Agreement and mis-declaration of non-alloy steel goods as alloy steel, the appropriate tariff barriers are not in place to protect PSM and the rest of Pakistan’s steel industry.
Published in The Express Tribune, November 27th, 2014.
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I m Karachiite, (Descendant of Immigrant) and no way in hell this project is Punjab related. Stop spewing propaganda. 
What a ride you are taking Pakistan on. Gotta respect that ! 
