A good omen

Hardly two months of tenure of the PML-N government are left but it is anxious to sign the revised Free Trade Agreement (FTA-II) with China, ignoring the national interest and hastily providing benefits to the vested interest. It is a good omen that the signing of the FTA phase II was delayed at the last moment due to the reservations of the business community and opposition law makers on the final offer list shared by Beijing with Islamabad.

During a briefing by the State Minister for Finance Rana Muhammad Afzal on the status of negotiations on second phase of FTA with China, National Assembly standing Committee on Finance expressed concern over what it stated the secret nature of the negotiations that were held to finalize this agreement. Over the past few weeks, the Chinese ambassador has held meetings with the Commerce Secretary and Prime Minister Shahid Khaqan Abbasi to push the deal. The business community from Fiasalabad-Pakistan’s textile hub-voiced serious reservations about the Chinese final offer list.

China wants zero duties on 75 percent tariff lines that cover thousands of Chinese goods to flood the Pakistani markets, bulk of which may enter on dumping price in violation WTO rules of free trade. Under the first phase of the FTA Pakistan gave duty concessions on 35 percent of tariff lines which led to huge influx of very cheap Chinese goods and many local industries could not survive. The trade bodies are justified in their residence to giving irrational concessions to China which they realize to be extremely harmful to the local industry. Chairman of the National Assembly Standing Committee regretted that the Commerce Ministry did not take all stakeholders on board before offering huge concessions to Beijing.

Trade with China was already one-sided and if further concessions were given no industry would survive in Pakistan. Trade volume which stood at $ 4 billion before the signing of FATF-I in 2008 peaked to $15.6 billion in 2016-17. Pakistan’s exports were $1.5 billion in the last fiscal year, while imports from China amounted to $ 14 billion, causing a trade deficit of $ 12.5 billion. This time the technocrat law makers of the opposition parties closely watch the modus operendi adopted by the secretive PML-N leadership for negotiating and signing the international agreements which adversely affect the economy. PakistanTehrik-i- Insaf MNA Asad Umer said that Commerce Ministry did not hold consultation with parliament before holding talks with China. He underscored the need for review of the trade figures to determine how much from China was the outcome of change of destination from Europe and West to China. He said free trade agreement should not be constructed on theory rather it must be based on ground realities. The ground reality is that Pakistan’s industry is not competitive.

A joint meeting of National Assembly standing Committee on finance and commerce will now be held to finalize parliament’s response to FTA-II. Beijing push for trade liberalization will certainly explode the myth of country’s rapid industrialization created by the Planning Minister Ahsan Iqbal through the premature idea of relocation of Chinese high-tech industries to Special Economic Zones (SEZs) and joint ventures between Pakistani and Chinese entrepreneurs. Chinese industries use 5th generation technology and Pakistan’s industrial base operates on second generation technology. A quantum leap to 5th generation technology is not possible with in the next few years. If FTA-II materializes then it would be convenient for Chinese companies to manufacture their products in China and supply them to Pakistan at zero duties which would render SEZs useless

If the capital intensive economy of the United States can not afford the free trade regime with China then how a debt riddled economy can sustain the luxury of FTA-II with 75 percent tariff lines at Zero duty. The United States has imposed $ 50 billion duties on Chinese goods and President Donald has hinted at $ 100 billion more duties on imparts from China. A wave of protection of domestic industries is surging in Europe. In democracies international agreements are discussed in the parliament where the will of the people is reflected. But Pakistan is a peculiar type of democracy where cobweb agreements with IPPs, LNG import agreement with Qatar and FTA-I with China were made without consultation with the parliament. The FTA-II must be ratified from the parliament. The people have not given mandate to the present government to bypass the parliament for signing the international agreements that negatively impact the economy which is still away from take off stage.