Published On: Tue, Nov 10th, 2015

Pakistan-Turkey free trade agreement delays on difference over tariffs


The signing of a free trade agreement (FTA) between Islamabad and Ankara is lingering on their difference over the tariffs for textile goods in an effect of the contract, said a business leader.

Rashid Abro, chairman at Pakistan-Turkey Business Council of the Federation of Pakistan Chambers of Commerce and Industry, said Turkey wants duty structure on apparel and clothes coming into Turkey to remain intact even after the FTA signing.

“Pakistan has proposed five percent [tariff] for the two-year period,” Abro added. “The main objection is on tariff rates on textiles.”

Knitwear and crochet clothing are among Turkey’s top 10 exports, earning the country more than 10 percent of its yearly $158 billion worth of exports.

Turkish Prime Minister Ahmet Davutoglu, in his visit to Pakistan in February this year, told media that the two countries would finish negotiations on FTA by June.

Davutoglu further vowed to lift the bilateral trade to five billion dollars within three years by eliminating tariff and non-tariff barriers to trade.

Currently, the bilateral trade between Pakistan and Turkey is hovering below US$600 million – barely one and half percent of the former’s total trade volume.

Over the last three years, Pakistan’s exports to Turkey continued their downward spiral, having dropped to US$322.597 million in the fiscal year ended June 30, 2015 from US$366.170 million in the 2013/14 fiscal year and US$414.353 million in 2012/13, the State Bank of Pakistan (SBP) data showed.

Its imports, however, moved up to US$238.448 million in the previous fiscal year from US$223.480 million and US$207.177 million in the preceding fiscal years, said the SBP.

Abro denied that a trade agreement would not benefit Pakistan, which earns more than 50 percent of its annual exports revenue from textile products.

“We can tap opportunities in rice, carpet and agriculture exports,” he said.

Pakistan’s chemical trader Zahid Umer said Turkey’s short distance to Romania, Bulgaria and Ukraine, can enable Pakistan to warehouse its products and export them to Europe.

Pakistan is connected to Turkey via road through their neighboring Iran.

The western Asia Muslim-majority nation can become a doorway to Europe for Pakistan, Umer agreed.

“There is a possibility that the [European Union] compliance issue stands in the way of the FTA,” he said. “But, bureaucratic hurdles are the major cause of the delay.”

The 28-member European Union (EU) bloc, Pakistan’s second biggest trade partner in the world, raised eyebrows over the human rights’ violation in the country – a serious issue that may deprive the South Asian economy of duty relief it got for its score of products, majorly textiles, in the EU countries under the generalised scheme of preferences plus status.

“Turkey may be avoiding the FTA because of pressure from the EU for it longs for an EU membership,” Abro said.

“But, the prospect is not bleak and the prime ministers of the countries will sort out things.”

He said the FTA is expected to be signed by January next year.

Pakistan has signed free trade agreements with China, Sri Lanka and Malaysia. The accords help the economic partners to overcome tariff impediments to trade growth.

Besides having trades in textile, leather chemicals, machineries and defence equipment, Pakistan and Turkey have a long investment relationship.

Several Turkish companies have invested in various economic sectors of Pakistan. Turkish Zorlu Energy trail-blazed the renewable energy sector of Pakistan by investing multimillion dollars to set up a wind power project in jhimpir village, 120-kilometre north east of Karachi.

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