The second phase protocol of China Pakistan free trade agreement came into force, and the zero tariff range increased to 75%

The second phase protocol of China Pakistan free trade agreement came into force, and the zero tariff range increased to 75%

  • Category: Focus
  • Date: 17-03-2020

According to the Ministry of Commerce, the amended protocol between the government of the people's Republic of China and the government of the Islamic Republic of Pakistan (hereinafter referred to as the protocol) entered into force in December 2019. At present, China and Pakistan have completed relevant domestic procedures, and the tax reduction arrangement of the protocol will be implemented from January 1, 2020.

The protocol upgraded and revised the market access and tariff concession table, rules of origin, trade remedy, investment and other contents of the original free trade agreement, and added a chapter on customs cooperation. Among them, the core content is to substantially improve the level of goods trade liberalization on the basis of the original free trade agreement.

According to the protocol, the proportion of zero tariff products between China and Pakistan will gradually increase from 35% to 75%. In addition, the two sides will implement a partial tax reduction of 20% for other products accounting for 5% of their respective tax items. Through consultation between China and Pakistan, tariff concessions will be implemented as soon as possible after the completion of necessary domestic procedures.

Dawn, Pakistan's largest news media, reported on January 26, 2020 that the new trade agreement was a "landmark development".

Q: What is a free trade agreement?

A:
Free trade agreement. It is a legally binding contract between two or more countries to promote economic integration. One of its objectives is to eliminate trade barriers and allow free flow of products and services between countries. The trade barriers mentioned here may be tariffs, complicated rules, etc.

Background traceability
The so-called China Pakistan FTA in the second phase is naturally compared with that in the first phase. The first phase of free trade agreement between China and Pakistan was officially signed in November 2006 and came into force in July 2007.

First phase timeline
In November 2006, China and Pakistan signed the free trade agreement between the government of the people's Republic of China and the government of the Islamic Republic of Pakistan, which was implemented in July 2007.

This is the first free trade agreement signed between China and South Asian countries, mainly covering trade in goods, investment and other fields.

In February 2009, China and Pakistan further signed the agreement on service trade in China Pakistan Free Trade Area, which was implemented in October 2009.

First stage trade volume
After the signing of the first phase of the China Pakistan Free Trade Agreement, the bilateral economic and trade relations between China and Pakistan have developed rapidly, with an annual trade volume of 19.08 billion US dollars, 3.6 times that before the implementation of the agreement.
As a result, China has become Pakistan's largest trading partner, largest import and investment source country, and the third largest export market.
Pakistan has become China's second largest trading partner in South Asia.

After the signing and implementation of the first phase of China Pakistan Free Trade Agreement, although the trade relations between China and Pakistan have been developing unprecedentedly and the trade volume between China and Pakistan has also increased significantly, Pakistan believes that since the formal implementation of the trade agreement, Pakistan has made relatively little profit, which not only has not decreased, but has increased the trade deficit between China and Pakistan; at the same time, it also believes that the preferential treatment given by China to Pakistan in the agreement is far away Under the preferential treatment given to ASEAN countries, the products exported by Pakistan are lack of price competitiveness.

In order to meet Pakistan's demands, China and Pakistan formally launched the second phase of negotiations of China Pakistan Free Trade Agreement in March 2011.

Second stage timeline
In March 2011, China and Pakistan officially launched the second phase of FTA negotiations. Eleven meetings were held.
In September 2017, the negotiation process was accelerated, and the two sides made important progress on market access of goods trade, rules of origin, customs cooperation, investment and other issues.
In November 2018, the new Prime Minister of Pakistan, Imran Khan, paid an official visit to China for the first time. The two countries issued a joint statement and agreed to complete the second phase of the China Pakistan FTA negotiations as soon as possible.
On the eve of Pakistan's prime minister Imran Khan's visit to China on April 25, China and Pakistan reached an agreement on the second phase of the FTA negotiations and initialed it.
On April 28, 2019, witnessed by the prime ministers of China and Pakistan, the second phase of China Pakistan FTA was officially signed.
On December 1, 2019, the protocol between the government of the people's Republic of China and the government of the Islamic Republic of Pakistan on Amending the free trade agreement entered into force.

Core content
Looking at the second phase of the FTA between China and Pakistan, the market access of goods trade is upgraded to the core content of the agreement. On the basis of the first phase of FTA, the two sides will substantially reduce the tariff level between the two countries and further expand the liberalization of goods trade between the two countries.

Concrete and positive
After the implementation of the second stage agreement, the proportion of zero tariff products between China and Pakistan will be increased from 35% in the first stage to 75%, and the level of liberalization will more than double.

After the entry into force of the agreement, China will immediately cancel tariffs on 45% of Pakistan's tax items, and gradually cancel tariffs on 30% of Pakistan's tax items within 5 years and 10 years respectively.
After the agreement comes into force, Pakistan will immediately cancel tariffs on 45% of China's tax items, and gradually cancel tariffs on 30% of China's tax items within 7 years and 15 years respectively.
In addition, the two sides also reduced taxes by 20% on other products accounting for 5% of their respective tax items.

Reduction and exemption products
China will implement tariff reduction and exemption on the cotton yarn, leather, clothing, aquatic products, nuts and other export priority products that Pakistan focuses on.

Pakistan, on the other hand, will implement tariff reduction and exemption for the export advantages of Electromechanical, furniture, textile, phosphate fertilizer, glass products, automobile and motorcycle parts that China focuses on.

customs cooperation
Customs cooperation is a new part of the FTA between China and Pakistan. The two sides agreed to include electronic data exchange provisions of customs, strengthen Customs supervision of the two countries, and play an important role in improving the level of trade facilitation between the two countries.

The two sides also committed to ensure the implementation of the memorandum of understanding on electronic data exchange signed by the competent authorities of China Pakistan Customs on November 3, 2018.

China's China Ministry of commerce one belt, one road, and the second Ministry of Commerce, said that with the signing and implementation of the Sino Pakistan Free Trade Agreement, the tariff level between China and Pakistan will be greatly reduced, which will further promote the investment and production cooperation between China and Pakistan, and provide better conditions for Chinese enterprises to go abroad and overseas production capacity layout, and will effectively promote the construction of "one belt and one road" and "China Brazil economic corridor".

At the same time, in the long run, the reduction of trade cost between China and Pakistan will promote the further integration of China Pakistan industrial chain, make full use of the comparative advantages of the two countries, enhance the competitiveness of enterprises in the regional and global industrial chain, promote the trade balance between the two countries, and promote the economic development of the two countries.

Trade profile of Pakistan
Pakistan trading partner
Top 10 trading partners: China, Saudi Arabia, the United Arab Emirates, Kuwait, the United States, Japan, India, Malaysia, Germany, Indonesia;
Top 10 export destinations: US, UAE, Afghanistan, UK, Germany, Italy, China, Spain, Hong Kong, Netherlands;
Top 10 import source countries: Saudi Arabia, China, UAE, Kuwait, United States, Japan, India, Malaysia, Germany, Indonesia.

Trade between China and Pakistan
Pakistan is an important one along the "one belt, one road" and an important economic and trade partner of China in South Asia. Since the implementation and entry into force of the China Pakistan Free Trade Agreement, the effect has been good, and the total bilateral trade has been growing, especially in agriculture and industry.
At present, Pakistan is in a country which is developing rapidly from a traditional agricultural country to agricultural modernization, urbanization and industrialization. All kinds of agricultural machinery, agriculture, fertilizer, seeds, mechanical equipment and technology, hardware, building materials, chemicals and other products are in great demand, which is worthy of further development by China's export enterprises.

The 2020 Punjab agricultural exhibition in Pakistan will be held on June 22-23. It is sponsored by the Department of agriculture of Punjab province and is the most influential professional agricultural exhibition in Pakistan.

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