LAHORE - Pakistan Chemical Manufacturers Association (PCMA) has urged the government to defer signing on second phase of the Free Trade Agreement (FTA) with China to ensure necessary protection to the local industry.

PCMA Chairman Zubair Tufail observed with deep concern that the second phase of FTA, if signed with the given clauses, will allow a hefty inflow of imports in the country, which will not only worsen the balance of payment situation, but also ruin a large number of local industries.

Giving background of the Pak-China FTA, PCMA chairman informed that Pakistan entered in to first phase of FTA with China on 24th November 2006, when out of 6,711 Tariff lines, 2423 lines (36 percent) were allowed at zero duty, 1338 (20 percent) at zero to 5 percent duty and 157 tariff lines (2 percent) were placed at 50 percent margin of preference (MOP) i.e. the duty was reduced to 50 percent.

Whereas, 1768 (26 percent) tariff lines were placed at 20 percent MOP and 1025 (15 percent) lines were kept in the sensitive list having no concession, he said adding that maximum duty, under first phase of FTA, was 25 percent which was later reduced to 20 percent and most of the items having 20 percent Margin of Preference (MOP) were charged with 25 percent duty.

"Effectively, as of today almost 40 percent of tariff lines have the same duty as allowed under normal "Most Favored Nation" (MFN) tariff, but the Ministry of Commerce has increased the percentage of sensitive list from previous 15 percent to 25 percent under the second phase of FTA with China that has resulted into reduction of the tariff lines from existing 40 percent to 25 percent", he lamented.

The PCMA chairman further explained that in the revised FTA, the government of Pakistan had agreed to eventually reduce the duty to zero on all lines except 25 percent sensitive list.

Hence, 75 percent of the tariff lines will either be immediately at zero duty or will be at zero at an interval of 5-10 years, he added and observed that the Chinese industries, besides their sizes, have a great competitive edge for availability of cheap energy and conducive government policies, which have forced the world's biggest economy like USA to bend down before China.

He said that the country like Pakistan, with so many internal and external issues coupled with the most expensive energy cost in the region, inconsistent government policies and on top of everything much smaller market size, could not stand against China.

"We are not able to understand why the government is pushing so hard to enter into second phase of FTA with China in the prevailing unstable economic situation, Zubair said and pointed out that in the first phase Pak-China FTA, it is mentioned that the second phase will be signed at an appropriate time.

Since, there is no definition of appropriate time, it can be one year and can be 100 years, he said and asserted that currently it was not at all an appropriate time for Pakistan to enter into new FTA.

The PCMA Chairman has urged the government to defer the second phase of Pak-China FTA for the time being and if there is some pressure from Chinese side, the government has a genuine excuse of standing at the end of its tenure.

He cautioned that any hasty decision in this regard would badly hamper goodwill of the present government in the industry leading to a colossal loss of its vote bank in the business community.