Pakistan-China FTA

Phase-2 of Pakistan-China FTA kicks off

Pakistan-China Free Trade Agreement (FTA) Phase- II comes into effect from 1st January. The FTA commenced after the issuance of the Statutory Regulatory Orders (SRO) to implement the protocol agreed between the two countries.

China and Pakistan agreed mutually on the Phase-II of the project after the Prime Minister Imran Khan’s visit to China. Moreover, China agreed to wave off duties and tariffs on major Pakistani domestic goods.

The Federal Bureau of Revenue (FBR) in its statement said that the Pakistan-China FTA Phase-II will come into effect through SRO 1640(I)/2019 from January 1 (today) and will replace the old SRO 659(I)/2007 which was passed in June 2007.

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The statement issued by the FBR  said, “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 percent of the base rate on the date this protocol enters into force and in MOP2 the duty structure will be reduced 20 percent 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,”

Pakistan and China signed an agreement regarding the FTA Phase-II in Beijing on April 28, 2019, PM visited Beijing. The new FTA enabled Pakistan to magnify the scale of products, also more extensive concessions on products are being given by China to Pakistan for its exports. 

The new agreement would also includes revision of safeguards mechanism for protection of the domestic industry, inclusion of the balance of payment clause as a safety valve against balance of payments difficulties, which would help strengthen the export potential of Pakistan.

With its renewal, the latest FTA will give Pakistan an opportunity to increase its exports to China by $4-6 billion in the next five years.

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