The Free Trade Agreement (FTA) between China and the Association of South East Asian Nations (ASEAN) is going to negatively impact Sino-Pak trade, as most Asean countries, which are competitors of Pakistan, presently enjoy more tariff concessions under the FTA regime.
To avoid this negative implication of the trade with China, the FTA arrangement between the two neighboring countries is in need of serious and urgent reconsideration as Beijing is seemingly tilting towards ASEAN countries for certain goods and products traditionally imported from Pakistan. According to sources, though, the benefits to ASEAN countries due to this FTA are already visible as the bloc’s trade surplus with China has skyrocketed to $2.7 billion from $300 million last year. The result has been tough competition for Pakistani products in the Chinese market. “If the Pak-China FTA, which strongly favours the latter, is not revised after China’s FTA agreement with ASEAN, in addition to demanding more tariff concessions and increase in the list of trade items for Pakistani products, Pakistan stands to lose market share in the neighbourhood,” according to experts.
Experts also noted that in addition to enjoying more favourable tariff concessions than Pakistan, ASEAN countries also benefit from geographical proximity to China, an added advantage. Despite the FTA signed by the two countries in January 2006, Pak-China trade has still not developed to its potential. “Though China’s global imports now total over one trillion dollars, Pakistan’s export to China is still short of the billion dollar mark. Moreover, only 3.6 per cent of Pak exports are directed to China, despite the proximity of the two countries”. It is worth mentioning here that ASEAN-China ETA came into effect on January 1, 2010. The initial framework agreement was signed in 2002 with the intent of establishing free trade area between China and 10 member states of ASEAN. This FTA is the largest in terms of population (covering 1.9 billion people) arid third-largest in terms of nominal GDP and volume after the European Economic Area and NAFTA.
This FTA has reduced tariff on 8, 771 product categories to zero per cent which cover 90 per cent of imported goods. Average tariff rate for Chinese goods exported to ASEAN countries has decreased from 12.8 per cent to 0.6 per cent, whereas average tariff rate for ASEAN goods exported to China has decreased from 9.8 per cent to 0.1 per cent as of January 1, 2010. This reduction in tariff rates under FTA has taken effect between China and six original member countries of ASEAN such as Malaysia, Indonesia, Thailand, Singapore, Philippines and Brunei. The remaining four countries, Vietnam, Laos, Cambodia and Myanmar will follow the suit in 2015.
