China Free Trade Agreement with Pakistan: What it Means for Trade and Investment

The China-Pakistan Economic Corridor (CPEC) has been making headlines since its inception in 2013. The ambitious project aims to connect China`s northwestern region to Pakistan`s Arabian Sea coast via a network of highways, railways, and pipelines. The corridor is part of China`s larger Belt and Road Initiative (BRI), which seeks to enhance infrastructure connectivity, trade, and investment across Asia, Europe, and Africa.

One major development in this project is the China-Pakistan Free Trade Agreement (FTA), which was signed in November 2019 and came into effect on January 1, 2020. This agreement has the potential to boost trade and investment between the two countries, as well as increase Pakistan`s exports to China.

Under the FTA, China agreed to eliminate tariffs on 75% of Pakistan`s exports to China, covering around 3132 tariff lines. Meanwhile, Pakistan will gradually reduce tariffs on 35% of Chinese exports to Pakistan, covering around 7242 tariff lines. This means that Pakistani businesses will be able to export a wide range of items, including agriculture, textiles, and leather products, at a lower cost to China.

The FTA also focuses on addressing non-tariff barriers, such as sanitary and phytosanitary measures and technical barriers to trade. This will make it easier for Pakistani businesses to comply with Chinese regulations and standards, further enhancing trade between the two nations.

In addition, the FTA is expected to attract more Chinese investment to Pakistan, particularly in the manufacturing, agriculture, and energy sectors. This will create jobs and boost Pakistan`s economic growth, which has been struggling in recent years.

However, some critics have voiced concerns about the potential negative impact of the FTA on Pakistan`s domestic industries. They argue that the elimination of tariffs on Chinese goods may flood the Pakistani market with cheaper Chinese goods, making it difficult for local businesses to compete.

To mitigate these concerns, the Pakistani government has implemented safeguard measures, allowing it to impose temporary tariffs on certain Chinese products to protect local industries. The government has also launched initiatives to enhance the competitiveness of Pakistani industries, such as increasing support for research and development and promoting the use of modern technology.

Overall, the China-Pakistan Free Trade Agreement is a significant development for both nations, with the potential to boost trade and investment, create jobs, and spur economic growth. However, it remains to be seen how the agreement will be implemented in practice and its impact on local industries in Pakistan.