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Published by: KAMZnKIRZ Media Marketing Group on Mar 19, 2010
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09/19/2010

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PAK, CHINA AGREE TO IMPLEMENTFTA (FREE TRADE AREA)
Three years back ChinesePresident Hu Jintao andhis Pakistani counterpartPervez Musharraf oversawthe signing of a free tradeagreement between thetwo allies here inIslamabad on 24thNovember, 2006. Thedocument was signed bythe Commerce Ministers of both the countries.The architecture of the bilateral Free Trade Agreement includes Trade in Goodsand Investments in the first Phase and the leaders of both the countries havedecided to negotiate on Trade in Services during 2007 to enlarge the coverage of the Free Trade Agreement.
LATEST ACHIEVEMENT
The enforcement of Free Trade Agreement (FTA) in services area betweenPakistan and China from October 10, 2009 is the latest achievement in FTA.“China has a large market with demands at different levels, which would make iteasier to seek economic cooperation with a variety of countries at differentlevels,” said Xu Ningning, executive secretary general of China-ASEAN at the 6thChina-ASEAN Expo held in Nanning, capital of south China’s Guangxi ZhuangAutonomous Region.“China’s participation in building FTAs has demonstrated the country’s efforts inrealizing free trade, especially in a time of increasing protectionism and tradefrictions,he said. According to FTA, in trade Pakistan will open 102 sub-departments in 11 service departments and China will open 28 sub-departmentsin six service departments. For China, more FTAs means more businessopportunities and better trade environment, especially for those with lessadvantages in outbound business in the past years. The trend of economicglobalization and regional integration would not end or slow down because of thefinancial crisis, and only economies that followed the trend would prosper, said LiRuogu, Chairman of the Export-Import Bank of China. The China-ASEAN FreeTrade Area (CAFTA), which is to be established on Jan. 1, 2010, is under heateddiscussion during the 6th China-ASEAN Expo in Nanning, the Xinhua newsreported. Guangxi, China’s south region bordering Vietnam, had already bornefruits from the establishment of CAFTA. The region’s trade volume with ASEAN
 
 jumped from 630 million U.S. dollars in 2002 when the building of CAFTA started,to 3.99 billion U.S. dollars in 2008, official data showed.After completing all procedures for entry into force, China and Pakistan haveexchanged diplomatic notes on the Free Trade Agreement on Trade in Services.The Agreement will come into effect on October 10, this year. The FTA on Tradein Services was signed by Pakistan and China during President Asif Ali Zardari’svisit to Wuhan in February. The diplomatic notes were exchanged by SecretaryCommerce Suleman Ghani and Chinese Assistant Commerce Minister WangChao, the diplomatic sources.
EARLY HARVEST PROGRAMME
The Early Harvest Programme between the two countries which was put intooperation on 1st January 2006, has been merged into this bilateral FTA. In theoverall package Pakistan will get market access at zero duty on industrialalcohol, cotton fabrics, bed-linen and other home textiles, marble and other tiles,leather articles, sports goods, mangoes, citrus fruit and other fruits andvegetables; iron and steel products and engineering goods. China will alsoreduce its tariff by 50% on fish, dairy sectors; frozen orange juice; plasticproducts; rubber products; leather products; knitwear; woven garments etc.Pakistan has given market access to China mainly on machinery; organic; andinorganic chemicals, fruits & vegetables, medicaments and other raw materialsfor various industries including engineering sector, intermediary goods for engineering sectors, etc.China and Pakistan are poised to widen the silk road between them by building afree trade area (FTA). For Pakistanis, it is mainly a "cotton road.'' Currently, 70per cent of Pakistani exports to China are cotton yarn and cotton fabric.However, the country is also keen to promote its other products ranging frommangoes to footballs.During Pakistani Prime Minister Shaukat Aziz's visit to Beijing in 2007, a protocolwas signed for the talks on the establishment of an FTA between the two nations,currently with an annual trade volume of around US$2.5 billion. Negotiations willstart in January 2008 and could be concluded within one year."I believe Pakistan and China will be very accommodating to each other in theFTA talks because of good relations between the two countries,'' Tariq Ikram,minister of state and chairman of the Export Promotion Bureau of Pakistan, toldChina Business Weekly in an interview. "Pakistan will respect China's needs, andChina will also respect ours. The negotiations will not be difficult.'' Chen Chao, anofficial with the International Trade Department of China's Ministry of Commerce,also said the relationship between the two nations is a very favourable factor for the FTA talks.
 
In economic terms, it would not be hard to obtain a win-win deal, he said. "Thedifference between Chinese and Pakistani goods in bilateral trade is relatively bigand the number of their competing goods is relatively small,'' he said in a writteninterview with China Business Weekly. Currently, more than 70 per cent of Pakistan's exports to China are cotton yarn or cotton fabric. The rest are leather products, minerals and seafood. China's main shipments to Pakistan includemachinery equipment, chemicals, electronics and footware.Now Pakistan intends to sell more grain, fruit and vegetables to China. ShahidMahmood, commercial and economic counsellor of the Pakistani Embassy inBeijing, said an "early harvest programme,'' which will mainly focus onagricultural products, is expected to be rolled out six months after the FTA talksare launched. Quarantine is a key issue here. Pakistan's Ministry of Agricultureand China's General Administration of Quality Supervision, Inspection andQuarantine are already talking about a mechanism to grant certificates toqualified Pakistani exporters.The farm products Pakistan wants to sell to China include rice, mangoes,potatoes, onions, dates and apricots. People in Beijing and Shanghai will not seemuch of these Pakistani produce appear in their supermarkets because,according to Mahmood, they will mainly target China's western regions, withwhich Pakistan has fairly good land transportation connection. Mahmood said herecently travelled along the roads linking China's Xinjiang Uygur AutonomousRegion and northern part of Pakistan and found conditions there are satisfactoryenough for the expansions of cross-border trade.For the Chinese side, a market with 150 million people in Pakistan is undoubtedlya source of great opportunities. A Sino-Pakistani FTA, which will mean less or zero tariffs for many products, could make the market more attractive. MaChunyan, an official with the chemical section of the China Council for Promotionof International Trade, sees a great market for Chinese pesticide and fertilizer producers. "I know a woman making 1 million yuan (US$120,000) in commissionthis year by serving as an agent selling pesticide to Pakistan,'' she said. Chinesebusiness people can benefit from the FTA not only by selling China-made goods,but also by investing in the country, Ma said. Some Chinese pesticide producersare already thinking about investing in Pakistan because of the market demandand low labour costs, she said.
INVESTING IN PAKISTAN
 Chinese companies already account for an important part of foreign investmentin Pakistan. About 500 foreign companies are now operating in Pakistan, 60 of which are Chinese. Many of these companies are operating in the public utilitiesand infrastructure sectors, such as mining, telecommunication and energy.

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