China-Pakistan Economic Corridor (CPEC) is being a marketed as an economic game changer for Pakistan, and truly, it can be- if Pakistan plays its cards right. The influx of Chinese investment and businesses holds great promise for the country- however, Pakistan must ensure that the trade bargains that occur is on an equal footing, and that no one party is able to take advantage of the other.

Recent developments in CPEC, such as the approving of Yuan currency for trade by the State Bank of Pakistan, have given China an enormous edge. Couple that with the statistics present; Pakistan is facing $10 billion trade deficit with China , as imports from China are around $12 billion, whereas Pakistan’s exports are only $2 billion. This trade imbalance between the countries tips the situation hugely in favour of China, and exposes Pakistan to the risk that CPEC can endanger the local economy and worsen the trade deficit. These are the factors that the Ministry of Commerce must keep in mind, before the next round of Pakistan-China negotiations for free trade agreement (FTA).

It is an encouraging step that Pakistan has took notice of the potentially vulnerable situation it can be put in, as Pakistan has formally asked China to encourage its products — mainly the eatables — into its market to contain tilted expansion in bilateral trade.

Many Pakistani items with better export potential deserve a lower tariff than provided in the existing free trade pact. The FTA currently allows concessions in tariffs to Pakistan on items such as leather articles, medical appliances and marble, but does not cover items such as fish, cotton, paper, plastic and textile items. To allow a smooth CPEC and friendly relations, the trade deficit must be lowered, as the imbalance between Pakistan and China accounts for 46% of Pakistan’s total trade deficit.

To ensure two-sided long-term economic benefits, China and Pakistan should focus on developing complementarities and avoid industrial competition. China should focus on furthering its electronic and electric products, on which Pakistan offers zero tariff rates under FTA, and let Pakistan develop and expand its exports on food items. Pakistan also needs to guarantee safeguards of the local industry from Chinese exports.

FTA increased Chinese imports by 380p, but Pakistan’s exports only by 195p, clearly indicating which country the agreement favours. We must not let the same imbalance occur again, with CPEC opening up further trade routes, and keep China-Pakistan friendship a two-way street.