Pakistan wants cut in customs duty on 35% of tariff lines

Under the fast-track category of the plan, tariffs may be brought down to zero

ISLAMABAD: Pakistan has proposed a tariff reduction plan under the Turkey-Pakistan Free Trade Agreement that calls about immediate elimination of custom duties on 35% of tariff lines amid steady progress in talks for early finalisation of the deal.

The plan has been shared with the Turkish authorities during the third round of FTA talks, held late last month in Ankara, according to officials of Ministry of Commerce. It is a flexible plan that is subject to further negotiations that will take place by the end of this month in Islamabad. The plan talks about 85% liberalisation of trade.



According to the proposal, under the fast track category, tariffs may be brought down to zero on 35% of the tariff lines. The international trade experts argue that the first phase of trade liberalisation should be crafted by keeping in mind factors like mutual advantages and impact on local industries.

Under the normal track, the tariffs are proposed to be lowered to zero in five years on 20% tariff lines. It mentions duty elimination in ten years under the sensitive category while for highly sensitive category, the Pakistani authorities have proposed to eliminate duties in ten years. It has protected 15% of the tariff lines from the reduction plan.

Turkey will give its views on the proposed plan in the upcoming meeting. The officials said that Turkey’s initial reaction to the plan was that 35% immediate liberalisation after the enforcement of the FTA was lower than its expectation.

FTA’s details

The decision to initiate negotiations for a comprehensive bilateral FTA covering trade in goods, services and investment was taken at the 4th Session of the High Level Strategic Cooperation Council (HLSCC) meeting, held in Islamabad in February last year.



After holding the inaugural session of FTA negotiations in Ankara in October 2015, the two sides signed the Framework Agreement for the FTA in Islamabad in March 2016 and are trying to complete the negotiations by end of this year.

During his visit to Islamabad, the Turkish PM said the goal of signing an FTA was to increase bilateral trade to $5 billion in the next three years and then to $10 billion.

The Turkish premier had termed the $650 million bilateral trade volume of 2015 “painful”. Pakistan is not happy with current level of its exports to Turkey, which were adversely affected when Ankara decided to impose 42.2% additional duties on Pakistani products by triggering trade safeguard measures.

Resultantly, Pakistan’s exports to Turkey halved within no time -a trend that Islamabad is keen to reverse.

Opposing perspectives

Both sides have difference of opinion over what constitute custom duties, as Turkey wants to include custom duties and all other duties on imported goods in the definition. However, Pakistan wants to exclude regulatory duties from the definition.

The PML-N government has imposed regulatory duties on hundreds of items aimed at boosting its declining revenues. Due to their ‘temporary nature’, Pakistan is reluctant to include the regulatory duties in the tariff reduction plan, said the officials.  Turkey also wants to bring para-tariffs under the ambit of the FTA.



The Ministry of Commerce and Federal Board of Revenue will formulate a joint position on the regulatory duties issue, said Dr Robina Ather, the additional secretary of the commerce ministry. Dr Ather led Pakistani delegation in the third round of talks.

She said during the last round of negotiations most of the issues on the fronts of trade in goods and services have been settled.

There is also a difference of opinion on including an enabling clause to withdraw concessions given under the FTA, which Turkey is not agreeing to on the ground that it will make the FTA unpredictable. This issue will be taken up again for discussion during the fourth round out talks.

During the third round of talks, both sides also agreed to the definition of origination of the goods.  One of the outstanding issues was the provincial levies, as Turkey was also keen to bring them under the ambit of the FTA.

Published in The Express Tribune, August 6^th, 2016.

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