Second Phase of China-Pakistan Free Trade Agreement Becomes Operational

Beijing: The second phase of the China-Pakistan Free Trade Agreement came into effect early this month providing zero duty facility to over thousand Pakistani products, while Islamabad continue to grapple with huge trade deficit with Beijing despite the inflow of large Chinese investments into the country under the CPEC.

Pakistan's trade deficit with China has further widened to USD 9.7 billion in 2018 in about USD 13 billion total trade, according to official data.

The second phase of China Pakistan Free trade Agreement (CPFTA) initiated from January 1, 2020. The first phase of the FTA between the two countries was signed in 2006.

China has committed to investment over USD 60 billion in Pakistan under the China-Pakistan Economic Corridor (CPEC) project under which it planned to build a number of special economic zones. India has objected to the CPEC as it is being laid through Pakistan-occupied Kashmir.

Commenting on the second phase of the FTA with Pakistan, Chinese Foreign Ministry spokesman Geng Shuang told the media here on Tuesday that the core content of the agreement is to substantially increase the level of liberalisation of trade in goods.

It "stipulates the proportion of the tariff lines with zero tariff products between China and Pakistan will gradually increase from 35 per cent to 75 per cent. In addition, both parties will implement 20 per cent reduction in taxes on other products that account for 5 per cent of their respective tariff lines. The tariff elimination measures started to be implemented from January 1," he said.

Noting that China and Pakistan are all weather strategic cooperative partners with sound momentum in ties, he said, "We will continue to deepen our political mutual trust, deepen all dimensional cooperation for greater high quality development of CPEC, and to deliver more benefits to our peoples."

The second phase of the FTA allows the Pakistani manufacturers and traders to export around 313 new products on zero duty to the Chinese market taking the total to products to 1,047, Pakistan's state run APP news agency reported.

The new facility will particularly benefit the textile sector to enhance its export to China as textile exports to China will virtually be duty free, it said.