Proposed FTA: Pak, Turkey still struggle to reach deal

Pakistan is reportedly unconvinced with the offer of Turkey to include items of Pakistan interest in the proposed Free Trade Agreement (FTA), well-informed sources told Business Recorder.

Both countries have discussed the proposed FTA at the level of their Prime Ministers to Commerce Ministers and technical teams but the pact is not yet finalised due to difference on offers.

The 5th round of talks on FTA was held in Ankara on December 21-23, 2016. Both sides presented initial offers for reduction of duties.

Keeping in view the aim of the FTA to enhance bilateral trade and better integrate each other’s economy, the offer received from Turkey was on the conservative side in terms of coverage of products of Pakistan export strength; Turkish offer included tariff lines accounting for only 28 percent ($ 68 million) of Pakistan’s exports to Turkey.

According to sources, the initial offer made by Pakistan is relatively more liberal and covers tariff lines accounting for 66 percent ($ 149 million) of Turkey’s current exports to Pakistan.

The offer includes concessions on sectors of Turkey’s export strength including machinery, chemicals, iron / steel and textiles. On the directions of Additional Secretary, Foreign Trade, the Ministry of Commerce is looking to make even more concessions on products of Turkey’s export interest including in the auto sector.

The sources said, Pakistan would like Turkey to favourably accommodate products of its export strength including cotton fabrics especially denim, cotton yarn, garments (key knitted and non knitted varieties), ethanol, PET, articles of leather, rice and carpets. Pakistan is facing higher tariffs on these products compared to Turkey’s other FTA partners including Egypt, Jordan and South Korea.

Pakistan’s exports to Turkey are also facing increased pressure due to imposition of high safeguard measures by Turkey. Almost 40 percent ($ 96 million) of Pakistan exports to Turkey are facing safeguard measures.

The main sectors include cotton fabrics, made up garments, articles of leather, carpets and footwear. Pakistan sensitised the Turkish counterparts on this issue to which the Turkish side raised its concern on the Regulatory Duty being imposed by Pakistan, the sources added.

Pakistan is willing to reduce the Regulatory Duty for the first time for any partner country. Although certain sectors showed reluctance, consensus on the decision to reduce Regulatory Duty was developed among stakeholders keeping in view the close relationship with Turkey and the overarching aim of the FTA to better integrate the economies of the two countries. Pakistan would like Turkey to reciprocate with the reduction in additional duties, sources added.

Turkey’s preferential trade continues to be influenced by the EU and the provisions of its customs union with the EU, as Turkey negotiates and concludes FTAs in parallel with the EU. Many of Turkey’s FTA partners are relatively small trade partners of Turkey. New FTAs concluded and entered into force are with Chile, Jordan, the Republic of Korea, Malaysia, and Mauritius.

Turkey’s FTAs notified to the WTO only cover trade in goods, and not services or investment. However, the FTA with the Republic of Korea is broader in scope, as it includes commitments on investment and services, and Turkey has started to include deeper commitments and disciplines on TBT, SPS, intellectual property, competition, dispute settlement, and trade remedies as part of its FTA negotiations.

Turkey has aligned its unilateral preference regime with that of the EU as well, and with few exceptions, offers GSP, GSP+, and Everything-But-Arms (EBA) arrangements to certain developing and least developed countries.

-Business Recorder