WTO members identify barriers in trade with Pakistan

DAILY TIMES

Sunday, March 23, 2008

By Sajid Chaudhry

ISLAMABAD: During Pakistan Trade Policy Review at World Trade Organisation (WTO), many WTO members expressed their observations on Pakistan’s trade and economic policies and suggested ways for improvement.

United States identified book piracy, weak trademark enforcement, lack of protection for proprietary pharmaceutical and agricultural chemical test data and pharmaceutical patents, as serious barriers to bilateral trade and investment.

According to the details released by Geneva-based Pakistan’s WTO Mission, the US representative appreciated the challenging times faced by Pakistan during its political transition. The United States also encouraged Pakistan to submit its 2005 new and full subsidies notification to the WTO for review. It believed trade liberalisation had slowed and the privatisation agenda stalled. Increased government involvement in the economy had burdened the federal budget and created considerable market inefficiencies, it observed. Production and export support had risen, as had monopolistic activities of state-run companies.

Pakistan’s economic fundamentals had improved; persistent structural weaknesses had raised the costs of doing business with Pakistan, thereby impeding productivity and competitiveness. Reducing political uncertainty and continuing trade liberalisation and other productivity-boosting structural reforms to promote economic diversification and sustained growth could best address it. The representative of the European Communities referred to Pakistan’s trade ties with the EC, which remained its first trading partner. The EC appreciated Pakistan’s steps to significantly reduce peak ad valorem tariff rates but they remained on a number of items, including motor vehicles. While the Capital Value Tax on motor vehicle imports had been withdrawn in June 2007, additional restrictions applied to commercial imports of used vehicles. The EC encouraged Pakistan to re-consider its motor vehicle import policy.

The representative of China said the China-Pakistan free trade agreement, which had entered into force in July 2007, would help deepen and broaden their economic relationship. Negotiations on trade in services commenced in April 2007 and were expected to conclude before long.

Although Pakistan has not formally recoginsed Israel, the representative of Israel during trade policy review expressed concerns with several of Pakistan’s policy instruments. In particular, Pakistan did not accord MFN treatment to Israel, banning all imports. Israeli FDI was also prohibited. It sought explanations from the Pakistan delegation on how these measures conformed to WTO requirements on non- discrimination. The representative of India noted areas of concern such as Pakistan’s low level of tax collection, narrow basket of exports, low agricultural productivity, and regional imbalances. Bilateral trade remained relatively small. A major constraint was Pakistan’s continued denial of MFN status to India, with Indian exports restricted to a positive list of 1,802 products. India believed Pakistan’s restrictive trade regime with India sharply reduced the mutual benefits from bilateral trade and prevented the complementarities of the two economies from being realised. It urged Pakistan to reconsider its trade policy regime with India to conform to the GATT, and hoped that implementation of the South Asian Free Trade Agreement from January 2006 would improve the situation.

The representative of Japan cited Pakistan’s many challenges included under-invoicing by importers, which unduly lowered import prices and needed remedying to induce more joint-ventures, and a number of excise tax concessions favouring local content that seemed unjustified under WTO SCM Agreement.

The representative of Singapore said while Pakistan had liberalised, there was scope for improvement in tariffs, services, investment, and the use of anti-dumping measures. The representative of Thailand said Pakistan’s tax refund and rebate procedures for exporters could also be simplified.

The representative of Turkey identified remaining problems to be addressed included the considerable gap between the bound and applied rates, which reduced predictability, some domestic taxes that discriminated against imports, imposition of regulatory duties in addition to tariffs, the complex tax system, and the strong state involvement in trade. Turkey encouraged Pakistan to further reform these areas so as to improve the transparency and predictability of its trade regime.

The representative of Norway said that in order to positive FDI trend to continue it was imperative that domestic political risk and uncertainty be managed. The representative of Australia welcomed indications that it would continue to open services to international competition and that new market access would be reflected in its revised Doha Round offer.

The representative of the Republic of Korea identified that the use of discretionary reference prices had sometimes resulted in friction with importers and delayed clearance. Korea sought an elaboration from the Pakistani delegation on any plans to address this issue and to enhance the transparency of customs procedures.

The representative of Hong Kong and China looked forward to further improvements in Pakistan’s import tariff regime under the current market access negotiations. The representative of Canada urged Pakistan to reduce the complexity of its overall tariff structure, in particular reducing the 15 percent specific tariff rates and generally simplifying the 14 percent ad valorem rates. Regulatory duties on certain imports had recently become less transparent.