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Pakistan should ink more free trade agreements

Pakistan should ink more free trade agreements

SYED MOHAMMAD TAHIR

 LAHORE: In recent years, we have witnessed a spectacular rise of regional and bilateral trade agreements in most parts of the globe. In Asia, a myriad of new trade agreements have blanketed the whole region where not only individual countries are signing new trade agreements with others states but economic blocs also prefer to ink various Memorandum of Understandings (MoUs).

Even rival countries of the world are also found themselves bound to sign agreements with their arch-rivals like Japan and China as well as India and Pakistan.

This trend of trade agreements is also true for Europe and America as well, with the consolidation of the monetary union and the rapid expansion to incorporate Eastern European countries. Besides this, in Africa there has also been a renewed interest in pursuing policies to promote regional integration. At the same time, there has been a growing interest in the developing world and between developed and developing countries to cooperate in the provision of regional trade cooperation projects.

Pakistan is not an exceptional case as it has also signed a number of trade agreements with its neighbouring as well as friendly countries to enhance its exports. For example, Pakistan has already signed trade preferential agreements with Malaysia, Sri Lanka, China and many other countries of the world while other agreements are in the pipeline. The most discussed Most Favoured Nation (MFN) agreement with India is still under process which has been delayed because of certain reservations. Pakistan has also inked MFN agreement with China in phase-wise. To get $95 billion export target, Pakistan is striving hard to explore new markets in the world and endeavouring to make new agreements with different countries.

Though India is an arch rival of Pakistan and does not spare a chance to harm Pakistan but still economic liabilities have compelled India to maintain and enhance economic ties with Pakistan rather than wage a war. In this regard, India has awarded MFN status to Pakistan years ago and is hoping for the same behavior but Pakistan has some apprehensions in this regard since Pakistani businessmen think that after awarding MFN status to India, local industry which is already on the verge of collapse due to scarce energy would be completely ruined after India floods its items across Pakistan.

Last year PPP-led government had decided to award MFN status to India till December 2012 but non-removal of NBTs from Indian side put Pakistan into a fix and decision in this regard deferred for a certain period. However, after winning election, it is hoped that PML-N government would restart the dialogues. Considering recent exchange of decent words between Pakistan Muslim League-Nawaz (PML-N) chief Nawaz Sharif and Indian Prime Minister Manmohan Singh as a good omen, the business community of the country is expecting that this government will grant the Most Favored Nation (MFN) status to India.

In this regard, prominent business leaders of the country believe that Nawaz has the capability to deal with India on equal basis. An office-bearer of FPCCI on the condition of anonymity said that being a mature political party, PML-N is enough capable to start dialogue with India on equality basis. After getting thumping majority in recently held elections and sharing respectable notes with India, it is clear that MFN status is not far in the PML-N government, he said adding that the new government will have to work on abolishing the hidden barriers and taxes created by India in trade agreements.

The businessmen of Pakistan are of the view that trade between two countries could boost Pakistani exports but trade should be dealt with India on equality basis because hidden clauses in agreements are stopping Pakistani exporters and importers to earn more benefits.

KCCI President Haroon Agar opined that ­industrialisation and enhancing exports is the imperative solution to uplift the economy. MFN status to India will help the country come out of crisis of current deficit as exports will rise through free trade between both the countries, he claimed.

Agar further said that Pakistan should focus on signing preferential and Free Trade Agreements with friendly countries because having good relations with India favour Pakistan’s economy. MFN status to India is much in favour of Pakistan than India, as it’s a good chance to increase trade by exporting goods to a country of billions of people, he added.

Agar further revealed that trade between both countries will not smash Pakistani agriculture sector as being considered by some agri experts. However, traders of agronomic products will enter in the new competitive business atmosphere which they have never seen, adding that general consumers want cheap products only without paying attention where they are coming from, so to facilitate the consumer of Pakistan trade with India should be opened.

The trade agreements, he said, should be based on win-win situation instead of giving benefits only to India as seen in the past. Equality in treaties can benefit the trade of Pakistan otherwise this will wreak havoc on the already moribund industries and productive sectors of the country, he added.

He further said that priority in trade should be given to non-energy consumed sectors so that our exporters can bring foreign reserves in the country on urgent basis.  India is hoping the two sides will also expedite action on other areas where convergence was achieved in 2012. These include the creation of an Indo-Pak Joint Business Council to guide the bilateral trade and investment dialogue and improving air connectivity between New Delhi and Islamabad. More efficient courier services and telecom linkages, including international roaming facilities are also to be explored.

Pakistan government not only giving emphasis to neighbouring countries for trade agreements including India, Sri Lanka and Bangladesh but also  having eye on far flung countries including Malaysia and Indonesia. Pakistan has also signed a preferential agreement with Malaysia. Ambassador Republic of Indonesia to Pakistan Burhan Muhammad said that the Indonesia-Pakistan Preferential Trade Agreement (PTA) was a landmark development for both countries which will not only raise bilateral trade volumes but also open doors for Pakistani businessmen to penetrate into the emerging Asean market. He stated that his priorities were to enhance economic cooperation between Indonesia and Pakistan and to connect the business communities of two countries to further strengthen mutual linkages.

He mentioned that although there was some delay in the implementation of the PTA, he would meet with the Indonesian Trade Minister to resolve the issue. The envoy, however, affirmed that besides economic and commercial cooperation, Indonesia also intends to invest in power projects in Pakistan, as Pakistan can get benefit of Indonesian expertise in the coal sector, adding that Pakistan and Indonesia are also negotiating to construct a coal power plant in Karachi for generating electricity by using domestic and Indonesian coal.

Likewise, ambassador of Finland Rauli Suikkanen has said that Pakistan holds geo-strategic location in the region. As Pakistan is a vibrant country having immense trade potential and resources, his country would like to enhance trade relation with Pakistan. In this regard he also offered some preferential trade agreement with Pakistan. He revealed that in 2014 Inter Ministerial Meeting is being planned for broad-based meeting including trade.

Reciprocal trade need enhancement aligned with true potential. Finland is hold most hi-tech industries in the Europe region having mixed Eurasian norms and culture. Being the member of EU, Finland will support Pakistan to achieve GSP plus in EU. He hoped newly elected government will resolve energy crisis, Finland can offer its assistance.

Pakistan is the most promising land in the region for investment, he said adding that Finnish corporations can invest in Pakistan while expanding their businesses across Pakistan and beyond. Currently Finnish investment in Pakistan stood around $3.8 million in 2013, he added.

He stated that Finland is an important country in European Union which can support Pakistan for getting GSP Plus in EU, entering into Pak-EU Bilateral Investment Treaty, signing of Preferential and further entering into Free Trade Agreement with the EU with preferred market access, he maintained. He further added that in FY12, Pakistan imported commodities of about $188m while exports to Finland amounted to $52m which is comparatively quite low showing trade deficit between the two countries.

Though Pakistan government has signed a number of trade agreements with different countries of the world but Pakistan has given a special status to China in this regard. That was why, markets across the country have been filled with Chinese items. From needles to innovative toys to replicas of American or European different items, all products have been pouring in Pakistan from China frequently and in bulk.

It would be not out of place to mention here that Pakistan and China gad signed a Free Trade Agreement (FTA) in November 2006, after which Chinese products flooded the local markets. While Pakistan imports about 1,000 items from its neighbour to the north, exports to the country stand at a dismal below-50 figure. From December 2006 to August 2010, we imported around $11.1 billion worth of goods from China. The value of our exports to China over the same period was only $0.25 billion.