A Review of CPFTA (China Pakistan Free Trade Agreement)

The whole world is engaged in trade up tp 60% on the basis of more than 300 regional Free Trade Agreement (FTA). China and Pakistan FTA is also part of it. Both the countries signed an agreement of FTA in November 2006 and the FTA was in full bloom in 2007. Under FTA, Pakistan and China relaxed freight/levy/duty on 6148 and 6711 goods respectively. CPFTA was for 5 years and had ended in 2012. Later, none of the two thought of revisiting that CPFTA and Pakistani businessmen community had serious reservations on that first five year CPFTA.

Besides under-invoicing, China exported goods to Pakistan worth $16.9bln while Pakistan could only exported goods to China worth $2.2bln and thus an acute gap of $14.7bln existed with extreme pain on Pakistani reserves.

China benefited from CPFTA up to the extent of 60% while Pakistan only did up to just 4% while Chinese exports swelled to $17bln from just $4.2bln. Pakistan’s volume of exports to China could only enhance up to $2bln from just $0.6bln. Ultimately, China benefited immensely from trade with Pakistan. Pakistan devastatingly suffered from relaxed duty on Chinese products and goods and suffered irreparable and colossal loss of its accumulated foreign reserves that speedily depleted.

With regard to second phase of CPFTA, China has consented to relax duty on 520 out of 1059 (49%) products and goods while Pakistan has also reciprocated to relax duty on 797 out of 1349 Chinese products and goods (59%). Pakistan has demanded of China to facilitate Pakistan with ASIAN Tariff on 313 goods including Textile Goods. China is facilitating ASIAN Countries like Indonesia, Thailand, Singapore, Malaysia, Philippine, Vietnam, Cambodia, Brunei Dar As Salam, Myanmar and Laos with relaxed duty. That’s why the ASIAN Countries are increasing their exports to China with a sped of a space rocket.. Since Pakistan is not a member of ASIAN and hence Pakistan pays 10% of Customs Duty on goods it sends to China under exports.

Pakistan must sign an agreement with ASIAN Countries, as well to obtain facilities that are specific to ASIAN Countries while trading with China because China, South Korea, Japan, India and New Zealand have also already signed deals with ASIAN Countries for FTA. Today, China is the biggest Indian Yarn market while Pakistan is lagging behind because of 4% Customs Duty on Pakistani yarn exported to China.

In order to stop under-invoicing, Pakistan has also demanded China of Electronic Data Exchange (EDE) and once it is done, the under-invoicing would die for good. Pakistani businessmen community has also laid its demands that 1428 products and goods should be given a status of protected goods for the second phase of CPFTA of which 1171 products and goods have been placed under the category of protected products and goods. China has already consented to import Sugar, rice, cotton yarn, wheat, potato, onion and cherry from Pakistan.

PM Imran Khan along with prominent businessmen is visiting China on April 27 this current month to attend the second forum on One Belt – One Road (OBOR) and he would also sign the second phase of CPFTA during his stay in China after which hopes are high that the bilateral trade volume between China and Pakistan would swell to $20bln and the trade balance would more tilt in favour of Pakistan.

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