Pak-Jordan FTA: the sooner the better

From Business Recorder 8-01-2010


Proposals, agreements and negotiations are terms often used with respect to Pakistan's policy-making showing the absence of the most important factor i.e. the implementation. Pakistan's trade relations are no exception to this rule and are mostly confined to pre-implementation stages since long.
Pakistan enjoys the rather unwanted distinction of having as many as 10 proposed Free Trade Agreements (FTAs) on its plate, which is the highest number in the region. Yet, the slow progress on FTAs could be tracked by the fact that only 6 FTAs out of 26 are actually under implementation. There is, however, a ray of hope that the list of implemented FTAs would stretch to seven anytime soon.
This hope has emerged after Pakistan's commerce minister urged to speed up and formally ink the agreement when Pakistan's delegation next meets its Jordanian counterpart later this month. The two countries initiated FTA talks way back in 2005 and ever since have only progressed to reach the 'under consideration' stage - which is a slow process by regional standards where FTAs mostly become operational within 20 to 24 months of proposal.
FTAs generally have not been of great benefit to Pakistan's trade balance as they have only added fuel to the fire by swelling the import bill. But Jordan's case is exceptional as bilateral trade with the Middle East country has a volatile history with trade balances shifting in favour of one country to another every year. However, the trend has started shifting more in Pakistan's favour of late.
Pakistan's major imports from Jordan are mainly focussed on fertilizers which have more than 50 percent share in total imports. The good news is that Pakistan is most likely to stop importing urea fertilizer from 2012, which bodes well for Pakistan's trade balance with Jordan as it would reduce the import bill from Jordan to half of what it is now.
A more immediate benefit which Pakistan could reap from the FTA is easing the government's burden on imported fertilizer in the form of subsidy. Pakistani government allows duty free urea import and takes the burden of price differential on its books. The FTA, when implemented would certainly reduce the subsidy bill on imported fertilizer.
The Pak-Jordan FTA will also open doors for Pakistani exporters to capture the Jordan market with much more penetration once the duties are abolished. Jordan has big appetite for Pakistani cotton which constitutes around 45 percent of the country's total exports to Jordan. The exports become even more attractive considering the 12-15 percent premium pricing of Pakistani cotton in Jordanian market. Pakistan's bumper cotton crop this season could not have been timed any better either.

The fact that Jordan already has an operational FTA with USA would also act as a confidence booster for Pakistani exporters - as they duty free access to the US markets would be reason enough for the exporters to increase the bilateral trade, hence the trade surplus. Pakistan vows to quadruple its exports to Jordan in the post FTA regime. This is easier said than done, no doubt, but if the policies are implemented in true spirit - it could well become a reality.
===================================================================

Regional FTAs status

===================================================================

Proposed Framework Under Signed In effect Total

Agreement negotiation

===================================================================

Australia 5 1 5 1 7 19

China 7 2 4 1 9 23

India 11 5 7 1 8 32

Indonesia 6 2 1 2 5 16

Pakistan 10 5 3 2 6 26

Singapore 4 1 9 4 15 33

Thailand 6 5 3 1 9 24

===================================================================

Source: ADB