The PBC in its “2016 Second Review of the Feasibility of a Free Trade Agreement (FTA) between Pakistan and Turkey,” urged that Pakistan should emphasise on pressing for tariff reduction on its high potential export products.
“While the tariffs faced by the top 10 high potential items of Pakistan are low (9.6 percent or below), there is a significant difference between tariffs placed on Pakistan and Turkey’s Free Trade Agreement partners, Egypt and Jordon,” it said.
Turkey’s FTA partners Egypt and Jordan enjoy tariffs significantly lower than those currently faced by Pakistan; while the tariffs on Turkish exports, though high, are at par with those on the exports of Pakistan’s FTA partners including China, Sri Lanka and Malaysia.
The report said that Turkey has the potential to export $12.8 billion to Pakistan, with the greatest potential $346 million in trade of motor cars and other motor vehicles.
According to the report, tariff and trade simulation shows that had both the countries signed an FTA that eliminated all tariffs in 2015, Turkey’s exports would rise by 32% while Pakistan’s exports would only rise by 22%.
The Study finds that the benefits of a bilateral FTA are skewed in favour of Turkey and its export portfolio fits the import needs of Pakistan better than vice versa, hence Turkey is more likely to experience increased exports post-FTA.
Looking at the potential for both countries to increase their exports to each other, Turkey’s export potential is over 2.5 times larger than Pakistan’s export potential, the report observes.
The report urges that negotiations need to focus on tariff elimination across high potential exports, particularly those in which the exporter has a comparative advantage.
Pakistan should also be wary of non-tariff barriers, it says, adding tariff elimination alone cannot increase Pakistan’s exports to their 2011 level; those exports can be partly recouped if trade remedy provisions are made part of the FTA.
According to the study,Pakistan’s exports to Turkey are concentrated in cotton while its imports consist of machinery, electrical, electronic equipment, plastic, chemicals, synthetic staple fibres, and iron/steel.
Pakistan benefits from a positive, though sharply declining, bilateral trade balance, the report adds.
The report urges both the countries to do away with discrepancies in their reported data on which the bilateral trade policy is made, which would help promote trade.
