Study on China-Sri Lanka Free Trade Agreement

3.6 China-Pakistan Free Trade Agreement
Having been a very close ally of China for a long time, Pakistan was the first South Asian country to
establish an FTA, for both goods and services, with China. As the first step towards strengthening
trade links, the two countries have signed an Early Harvest Program (EHP) on 5 th April 2005, which
has become operational on 1 st January 2006. 126 Within a year on 24 th November 2006, Pakistan and
China have signed the FTA in goods and finalized the modalities for Stage One, which came into
effect on 1 st July 2007. 127 The agreement has been fully implemented in 2012. The FTA between
Pakistan and China was Pakistan's first and China's fourth bilateral FTA notified to the WTO. 128
Pakistan-China FTA has extended trade relations from trade in goods to trade in service. On 21 st
February 2009, the two countries have signed the Trade in Services Agreement, which came into
effect on 10 th October 2009. 129 While the agreement has used a positive list approach for
negotiations, the two countries have opened their service sectors in all four modes 130 to each other’s
markets on the basis of their commitments to the WTO.
Trade between China and Pakistan has seen a growth since the implementation of the FTA. China is
the one of the largest import sources of Pakistan and its share has increased from 14 to 17 per cent
during 2003‐2007 period. 131 Even though the exports have grown, 10 per cent growth in exports to
China was in products that remain outside the scope of the FTA. 132 Many of them are Pakistan’s top
exports to the world. Although china’s demand for these products is significant, Pakistan exports
contribute to less than 1 per cent of China’s imports of these products. 133
A growing increase in Pakistan’s trade imbalance with China was seen after implementing the FTA.
China has shown a significant increase in its share in Pakistan’s imports; 18 to 63 per cent in
electrical and electronics, 18 to 44 per cent in products of iron and steel, 7 to 45 per cent in manmade
staple fibres. 134 Post-FTA China has become the second largest source of Pakistan’s imports,
which accounts for over 25 per cent of total imports excluding petroleum products. 135
The Agreement is composed of 12 chapters: Chapter 1: Initial Provisions, Chapter 2: General
Definitions, Chapter 3: National Treatment and Market Access for Goods, Chapter 4: Rules of Origin,
Chapter 5: Trade Remedies, Chapter 6: Sanitary and Phytosanitary Measures, Chapter 7: Technical
Barriers to Trade, Chapter 8: Transparency, Chapter 9: Investments, Chapter 10: Dispute Settlement,
Chapter 11: Administration and Chapter 12: Final Provisions. The Agreement contains three annexes
126 Government of Pakistan (2012), “Pakistan-China Free Trade Agreement: Analytical Report on Textile and
Clothing”, Research, Development and Advisory Cell, Ministry of Textile Industry.
127 Ibid.
128 WTO Secretariat, Factual Presentation of Free Trade Agreement Between Pakistan and China (Goods), 2008,
available at: [http://rtais.wto.org/UI/PublicShowMemberRTAIDCard.aspx?rtaid=8]
129 Ibid.
130 Cross-border supply (Mode 1), Consumption abroad (Mode 2), Commercial presence (Mode 3) and
Presence of natural persons (Mode 4).
131 Government of Pakistan (2012), “Pakistan-China Free Trade Agreement: Analytical Report on Textile and
Clothing”, Research, Development and Advisory Cell, Ministry of Textile Industry.
132 The Pakistan Business Council (2013), “Preliminary study on Pakistan and China trade partnership post
FTA”, available at: [http://www.pbc.org.pk/assets/pdf/21-Oct_Pakistan_China_Trade_<strong>Study</strong>_2013.pdf]
133 Ibid.
134 Ibid.
135 Ibid.
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