Q: Could you introduce the background of the negotiations on China-Pakistan Free Trade Agreement?

A: In April 2005, Chinese Premier Wen Jiabao and Pakistani Prime Minister Aziz jointly announced the launching of the negotiations on the China-Pakistan Free Trade Agreement. Over the past a year and a half, China and Pakistan have had six rounds of frank, friendly and pragmatic negotiations, which have reflected the spirit of free trade, accommodated the concerns of both sides and led to an agreement that is satisfactory to both sides. The Agreement was signed on November 24, 2006 in the witness of President Hu Jintao and President Musharraf.

Q: What are the main contents of the China-Pakistan Free Trade Agreement?

A: The China-Pakistan Free Trade Agreement covers trade in goods and investment.

The Agreement consists 83 articles which are divided into the following 12 chapters, Initial Provisions, General Definitions, National Treatment and Market Access for Goods, Rules of Origin, Trade Remedies, Sanitary and Phytosanitary Measures (SPS), Technical Barriers to Trade (TBT), Transparency, Investments, Dispute Settlement, Administration and Final Provisions.

According to the Agreement, China and Pakistan will begin to reduce/eliminate tariffs of all the products in two phases from July 1, 2007.

During Phase I, both sides will eliminate the tariffs of the 36% tariff lines. China will mainly eliminate the tariffs of livestock, aquatic products, vegetables, mineral products and textiles. Pakistan will mainly reduce the tariffs of beef and mutton, chemicals and machinery products. Both sides will reduce tariffs of 49% tariff lines within 5 years of entry into force of the Agreement. The remaining 15% of tariff lines will not be subject to tariff reduction/elimination at this stage.  

Phase II starts from the sixth year of the entry into force of the Agreement. Both sides will further reduce tariffs of the products on the basis of review of the implementation of the Agreement. The aim is to eliminate the tariffs of no less than 90% of products, both in terms of tariff lines and trade volume within a reasonable period of time on the basis of friendly consultation and accommodation of the concerns of both Parties.

In terms of Rules of Origin, wholly obtained or produced products and products with not less than 40% originating value content are deemed to be originating from a party. Product specific Rules of Origin will be negotiated by both sides in future meetings.

Besides liberalization of trade in goods, the Agreement also covers investments, including the definitions, promotion and protection of investment, treatment of investment, expropriation, compensation for damages and losses and dispute settlement.

Detailed information is available on the website: www. mofcom.gov.cn.

Both sides will begin to negotiate on trade in services from next year.

Q: What economic benefits will China-Pakistan FTA bring to the both countries?

A: The bilateral FTA will provide systematic guarantee for the development of bilateral trade and economic ties, thus upgrading the level of trade and economic cooperation. It will help both sides to expand exports, realize market diversification, reduce expenses for consumers, cut costs for producers, attract foreign capital, facilitate international industry transfer, promote the development of related industries, and create new job opportunities.

The two countries are highly complementary to each other in industrial structure and import and export commodity structures. With the  establishment the bilateral FTA, China will increase the export of machinery, chemical, light industry and agricultural products and aquatic products to Pakistan. Pakistan’s import cost will be reduced for importing China’s low price and high quality products. Meantime, more Pakistani agricultural, mineral, livestock and aquatic products will be available in Chinese market.

The China-Pakistan FTA will also enhance bilateral investment. China’s enterprises will enjoy more favorable investment environment in Pakistan. In addition, the two countries also enjoy sound cooperation and vast vista in trade in services. The bilateral FTA will bring a win-win outcome for both countries.

This Agreement is the third free trade agreement that has been reached between China and foreign countries after the China-ASEAN FTA and China-Chile FTA. This Agreement will further upgrade bilateral trade and economic cooperation, and inject new vigor to the traditional friendly relations between China and Pakistan.

Q: Ever since China launched the FTA negotiations with ASEAN in 2003, it has been engaged in FTA negotiations with a number of countries. Why does China attach so much emphasis on FTA negotiations?

A: FTA is one pattern of the regional economic cooperation. At present, China is engaged in 10 FTA negotiations, covering 27 countries and regions. Free trade agreements have already been reached between Mainland China and Hong Kong, Macao, ASEAN, Chile, and Pakistan. Participation in regional economic cooperation is an important part of China’s opening-up policy. It will help China to participate in international cooperation and competition in larger scales, wider areas, and at higher levels. It will boost stable and rapid growth of China’s national economy, and also help realize mutual benefits and common development for China and other countries around the world.