On December 1, 2019, the Protocol to Amend the Free Trade Agreement between China and Pakistan entered into force, making substantial revisions to the China-Pakistan Free Trade Agreement (CPFTA) first signed in November 2006.
Phase II of the CPFTA (China-Pakistan FTA) includes protocol that will help to protect each nation's domestic industries.
Key Points for the Textile Supply Chain:
- Pakistan has offered China increased market access on raw materials, intermediate goods, and machinery.
- China has agreed to eliminate tariffs on 313 major export items from Pakistan - most of which are not part of the textile industry supply chain, other than leather.
- In addition to the reduced tariffs, 25 percent of the tariff lines have been placed on the protected list.
Protected categories relevent to the textile supply chain: textiles and clothing, chemicals, footwear, leather.
- The Protocol also revises the safeguard measures within the CPFTA to strengthen the protection of domestic industries.
To the extent necessary, tariff rates can be increased, or reductions suspended, for any product whose imports cause or threaten to cause serious ‘injury’ to the other country’s domestic industry, which produces a directly competitive product.
Why This Protocol Matters:
One of the biggest issues to nations signing FTAs with China is their fear that a flood of China imports will cripple their domestic industries.
The safeguard measures in the new protocol will give Pakistan the ability to halt or slow Chinese imports in specific categories should they feel that Pakistan's domestic industry was being threatened.
The new measure are more flexible and easier to implement, if necessary.