Pakistan moves to join MERCOSUR

Cabinet approves framework trade agreement with South American trade bloc

ISLAMABAD:

Pakistan is set to join MERCOSUR, a prominent South American trade bloc, after receiving cabinet approval for an ex-post facto agreement that could eventually lead to a Free Trade Agreement (FTA).

The prime minister has expressed serious concerns over the delays in ratifying the agreement, stressing the urgency of diversifying markets to increase exports.

The Ministry of Commerce submitted a framework agreement on trade between MERCOSUR and Pakistan for cabinet approval.

The Cabinet was briefed that both the Government of Pakistan and MERCOSUR had agreed to strengthen economic and trade relations through a Preferential Trade Agreement (PTA), which is expected to pave the way for an FTA. MERCOSUR, a trade bloc comprising Brazil, Argentina, Paraguay, and Uruguay, is the fourth-largest integrative market globally.

This bloc has been identified as a promising opportunity for market diversification, particularly for Pakistan's export sector, which has historically relied on a narrow range of markets.

The Ministry of Commerce provided a detailed background, explaining that the federal cabinet had previously approved the initiation of negotiations for a PTA with MERCOSUR.

Following this approval, the governments of Brazil, Argentina, Uruguay, Paraguay, and Pakistan worked together to draft a framework trade agreement.

The agreement is intended to lay the groundwork for stronger economic ties between the two regions.

The government of Argentina, which held the Pro-Tempore Presidency of MERCOSUR at the time, had earlier proposed that the framework agreement be signed during the MERCOSUR annual summit on July 21, 2006.

In preparation for this, the Ministry of Commerce sought legal vetting of the agreement from the Ministry of Law, Justice, and Human Rights.

Due to time constraints, a summary of the proposal was submitted directly to the then prime minister, who approved the signing of the framework agreement on the condition that ex-post facto approval be obtained from the cabinet.

Despite this approval, both sides struggled to reach a consensus on the scope of the PTA, resulting in a prolonged stalemate.

The Ministry of Commerce stated that under the Export Diversification of Strategic Trade Policy Framework (2020-2025), South America has been identified as a potential non-traditional market for Pakistan.

The country's trade presence in the region is currently well below its potential. Given this, the ministry believed it was crucial to resume negotiations and explore the possibility of signing a PTA with MERCOSUR that would be beneficial for both parties.

To move forward, the Ministry of Commerce sought ex-post facto approval from the federal cabinet for the framework agreement.

The Ministry of Law and Justice responded by confirming that the agreement did not involve fiscal or budgetary matters, meaning the Ministry of Commerce could seek the cabinet's approval under Rule 16(1)(h) of the Rules of Business, 1973.

This rule pertains to the signing of negotiated instruments with foreign countries and approval for their ratification. During the ensuing discussion, the prime minister highlighted the untapped potential of the South American market, which boasts 270 million consumers.

He noted that Pakistan's products could find significant success in this region, but the market had yet to be fully explored.

The prime minister also took note of the long delays in ratifying the framework agreement, urging all relevant ministries to expedite the process.

The cabinet agreed that all ministries should take stock of trade agreements and Memorandums of Understanding (MoUs) related to trade, investment, and economic cooperation that are currently under review or awaiting approval.

Ministries were instructed to prioritise the completion of these agreements and ensure that all requisite processes are finalised in a timely manner.

The Ministry of Commerce sought the cabinet's approval for two key proposals: ex-post facto approval of the framework agreement between MERCOSUR and Pakistan, and approval for the ratification of the agreement.

The cabinet reviewed the summary, titled "Framework Agreement on Trade between MERCOSUR and the Islamic Republic of Pakistan," which was submitted by the Commerce Division.

Following the review, the cabinet approved both proposals. The cabinet also directed all ministries to take stock of any pending agreements or MoUs related to trade, investment, and economic cooperation, ensuring that these are processed and finalised as a matter of priority.