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Signature of FTA with GCC agreed

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ISLAMABAD: Pakistan and the Gulf Cooperation Council (GCC) have reportedly agreed to sign free trade agreements (FTAs) whose terms of tariff reduction have been divided into five categories, well-known sources have indicated informed company registrar.

Sharing the details, the sources said that in the third round of Pak-GCC FTA negotiations held from May 30 to June 2, 2022, the following tariff reduction modalities were agreed: Category (A): zero duty from the first day of entry into force of the agreement; category (B): zero duty after 5 years of entry into force of the agreement; category (C): zero duty after 10 years of entry into force of the agreement; category (D): zero duty after 15 years of entry into force of the agreement; category (F): products in this category must not exceed 5% of tariff lines and are subject to a 50% tariff reduction and category (E) is excluded from liberalisation.

According to sources, MoC researchers have prepared a list of 2,096 tariff lines at HS 8 level, or 28% of total tariff lines, while the agreed terms are to keep the exclusion list at 20%, or 1 497 tariff lines.

The Ministry of Commerce, sources said, had sought comments from relevant ministries on which products needed protection and which should be kept in the exclusion list and which products could be transferred to categories D and F, – five percent of tariff lines, i.e. 369 tariff lines. .

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The GCC, which includes the United Arab Emirates, Saudi Arabia, Qatar, Bahrain, Oman and Kuwait, was established under an agreement reached on May 25, 1981 in Riyadh, Saudi Arabia. The GCC countries occupy most of the Arabian Peninsula and are known for their large reserves of crude oil and natural gas.

The GCC, at its Ministerial Council meeting in June 2004, agreed to consider the possibility of concluding a framework agreement on economic cooperation between the GCC States and Pakistan and to start negotiations on an FTA. The framework agreement was signed in Islamabad in August 2004.

Pakistan’s exports to the GCC increased by $483.2 million while its imports from the GCC fell by $4.5 billion during the period 2017-2020.

The PBC, in its report titled “Potential for a Pakistan-GCC FTA” is part of the PBC Market Access 2022 series, recommended the Pakistani government to delay the signing of the proposed FTA between Pakistan and the GCC for the following reasons: (i) Pakistan is likely to continue to import “mineral fuels (HS-27) in large quantities from the GCC regardless of signing the proposed FTA”. The GCC held a share of approximately 75.2% in Pakistan’s imports of “mineral fuels…” (HS-27) from the world between 2017 and 2020; (ii) under a similar trade agreement, Pakistan has offered a margin of preference (MOP) on the import of palm oil from Malaysia under the Closer Economic Partnership Agreement between Malaysia and Pakistan (MPCEPA).

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The same MOP was to be offered on palm oil imports when Pakistan signed the Indonesia-Pakistan Preferential Trade Agreement (IPPTA). What is important to note here is that Pakistan obtains all of its palm oil imports from Malaysia and Indonesia and that the reduction in tariffs only impacts the income of the RBF; and (iii) tariffs in GCC countries are in the range of zero to five percent, if Pakistani exporters are unable to increase their market share, the reasons are clearly other than tariff.

PBC was of the view that exports of “pharmaceuticals” (HS-30), medical devices, sporting goods including soccer balls, agricultural products, textiles and technology services, etc. needed special attention and that a special package should be drawn up for these sectors.

PBC further stated that the Pakistani government should encourage the development of testing centers in Pakistan where compliance testing can be carried out cost-effectively, which will improve the quality of Pakistani products to match international standards.

The Pakistani government should facilitate exporters in terms of fast and efficient customs clearance, subsidized freight charges for non-traditional products, etc. Pakistan must also protect its local industry and ensure it avoids indirect imports of Chinese and Indian goods through Dubai under an FTA, the PBC maintained.

Copyright Business Recorder, 2022