CHINA-PAKISTAN FREE TRADE AGREEMENT II A Preliminary Assessment - - PowerPoint PPT Presentation

CHINA-PAKISTAN FREE TRADE AGREEMENT II

Nazish Afraz and Nadia Mukhtar

A Preliminary Assessment

CPFTA 1: Trade with China has increased far more than that with other countries…

2007 2018 Growth 2017-18 (%)

China Exports 0.6 1.8 196 Imports 4.2 14.5 249 Rest of the world (excluding China) Exports 17 20 16 Imports 28 46 60

Source: ITC Trademap

Pakistan’s trade following CPFTA1, 2007-2018, in USD bn

..shifting further the higher growth trajectory that was there even before the FTA

20 40 60 80 100 120 140 160 180 200 2003-2007 2007-2011 %

Growth in Pakistan's exports

Exports to China Exports to word minus china

89 pp 200 pp

CPFTA 2: Export lines distributed by tariffs in China

6178 226 203 294 778 395 56 97 3 6 1000 2000 3000 4000 5000 6000 7000 0% 0-5% 5% 5-10% 10% 10-20% 20% 20-30% 30% >30% Number of tariff lines, by year 10 of FTA Phase 2

2,058 out of 8,238 will face tariffs by year 10

Breakdown of the 8238 tariff lines in CPFTA 2

Pakistan exports to China Pakistan exports China imports

• No. of Tariff lines

Priority 1 ✔︐ ✔︐ ✔︐ 399 Priority 2 ✔︐ ✔︐ 1424 Priority 3 ✔︐ 5378 Non-priority 1036 Total 8238

The large majority of tariff lines now face no duties in China

Source: Author’s calculations using Ministry of Commerce data for CPFTA tariffs and ITC Trademap for trade data. All trade data is for 2018 10 20 30 40 50 60 70 80 90 Products China doesn't import Priority 1 Priority 2 Priority 3 % of CPFTA2 tariff lines, by year 10

• f CPFTA 2

0% 0-5% 5% 5-10% 10% 10-20% 20% 20-30% 30% >30%

CPFTA 2: Distribution of tariff access improvements (Year 10)

0% 25% 50% 75% 100%

Priority 1 Priority 2 Priority 3 Products China doesn't import Expressed as % of tariff lines in that category

Compared to Phase 1

Same Better

Source: Author’s calculations using Ministry of Commerce data for CPFTA tariffs and ITC Trademap for trade data. All trade data is for 2018

Tariffs are now at least as good as those for top competitors for over 80% of tariff lines

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Priority 1 Priority 2 Priority 3 Priority 1 Priority 2 Priority 3 Phase I Phase II

Worse tariff than top Same tariff as top Better tariff than top

Phase 1 Phase 1

Priority 1 product lines that have competitive access under CPFTA2, by parent 2-digit code

2 4 6 8 10 12 14 16

500 1000 1500 2000 2500 3000 Miscellaneous edible preparations Cotton Plastics & articles thereof Vehicles other than railway,parts thereof Footwear, gaiters and the like Optical, photographic, medical or surgical Electrical machinery, equipment & parts Raw hides, skins, leather Articles of iron or steel Soap, organic surface- active agents Preparations of cereals, flour, or milk; pastry

products Furniture; bedding, mattresses Aluminium and articles thereof Preparations of vegetables, fruit, nuts

No of codes (in each HS 2-digit tariff line) Sum of China world imports 2018 (USD mn)

Sum of Chinese imports from world Number of codes

Source: Author’s calculations using Ministry of Commerce data for CPFTA tariffs and ITC Trademap for trade data. All trade data is for 2018

Specific product examples from Pakistan’s Priority 1 list

Tariff (CPFTA 1) Highest value trade partner (HVTP) Tariff faced by HVTP Tariff (CPFTA 2) Men’s cotton ensembles 14% Bangladesh 0% 0% Men’s shirts, other textiles nes 8% Italy 6% 0% Other frozen flat fish 8% USA 7% 0%

Impediments to expanding trade in these sectors

Information Marketing Capacity and competitivenss Trade Facilitation Domestic supply chain Non-tariff barriers

Conclusion

 Phase II of the China Pakistan FTA provides a substantial improvement

in tariff access for a range of Pakistani products in China

 Tariff access does not automatically translate into exports  Pakistani firms and Government of Pakistan will need to address non-

tariff impediments to maximise utilisation of the FTA