CPEC: Safeguard interests of local industry

To safeguard the interests of indigenous industry taking into account the China–Pakistan Economic Corridor (CPEC) and Free Trade Agreements (FTAs) with different countries, the Organization for Advancement and Safeguard of Industrial Sector (OASIS) has pushed the Federal Board of Revenue (FBR) and National Tariff Commission (NTC) to take timely measures against unfair trade practices

Talking to media, Executive Director OASIS Atif Iqbal said that the CPEC is also posing new challenges to the domestic industry in Pakistan, especially for the industry which is at the stage of infancy and is smaller in size when compared with Chinese industry. The Chinese industry has achieved economy of scale over years primarily due to their huge domestic market, industrial friendly policies and multiple incentives by their government.

Along with other members of OASIS representing leading domestic sectors, Atif said that it is imperative for the government of Pakistan to keep in mind all these factors while negotiating free trade agreement with China. Any negotiations to be made in this regard must be made on a reciprocal basis by allowing some leverage to the domestically produced items.

To a query on under-invoicing from China, the Executive Director OASIS said that it is also a matter of great satisfaction for the domestic industry that an online system of data exchange is going to be set up between Chinese and Pakistani customs authorities to deal with a challenges of under-invoicing and mis-declaration.

According to him, National Tariff Commission should be vigilant enough to take immediate cognizance of unfair trade practices like dumping and subsidization either suo motu or on the application of any affected parties. In the wake of CPEC and a free trade regime, it would be imperative for the trade regulatory authorities of Pakistan to take timely measures against unfair trade to safeguard the interests of indigenous industry. The importance of timely completion of investigations shall immensely increase and it should be ensured that unnecessary delays in the completion of investigations under the WTO laws should be avoided as it may cause an irreparable loss to the domestic industry. There is a dire need to rationalize trade remedy laws so that unnecessary litigation may be avoided.

About trade between Pakistan and China, he was of the view that a new vision needs to be developed between both of the countries whereby ‘let us produce together and export to rest of the world’ should be jointly pledged. The “CPEC can only be beneficial if we could enhance our exports through this mega trade route,” he said.

Asked about the planned Free Trade Agreements with Thailand and Turkey, Atif Iqbal said that the domestic industry is apprehensive about those items which are domestically produced and they have requested the Ministry of Commerce to refrain from offering those tariff lines. Any negotiations in this behalf must be based on the simple criterion that higher the value addition and local production, lesser should be the preference for inclusion in FTAs.

“We should set our priorities first and then open up our borders for free trade. We should make our industrial policy and decide what products we have to produce in our country and then undertake FTAs and PTAs in accordance with our priorities. The prospective sectors might need protection in the beginning and as long as these sectors do not get competitiveness, we should protect our sectors,” he said.

Another representative of OASIS said that the leading domestic industries are unanimous of the view that the investment to the tune of billions would be guaranteed in these sectors through motivation in the shape of timely completion of investigations by the NTC for imposition of anti-dumping duties, countervailing duties and safeguard measures against dumped imports where commission deemed appropriate.

It is a known fact that the prime objective of NTC is to protect domestic industry from the injurious effects of dumping, subsidized or a sudden surge in imports from foreign countries. The survival of the domestic industry largely depends upon the equilibrium of prices in the domestic market in comparison with the imported products. The practice of dumping is considered as “foul play” by the WTO in international trade. Therefore Article VI of the GATT Agreements provide for remedial measures in the shape of anti-dumping duties, countervailing duties or safeguard measures to protect domestic industry against these unfair practices by the foreign exporters, they maintained.

The domestic industry in Pakistan operates in highly miserable conditions where there are multiple economic problems like electricity load shedding, gas shortages, uncertain political situation and terrorism etc. The domestic industry direly needs protection till the time the economic stability as well as economy of scale is achieved in this country. “If our governments want sustainable industrial growth in our country, the institutions responsible for keeping a check on the unfair trade practices shall have to be strengthened,” he suggested.

He said trade remedial investigations are time-bound investigations strictly in accordance with the international treaties and commitments. Therefore, these investigations need to be carried out timely; otherwise, the importers/exporters would take undue advantage of the time limitation by making unnecessary litigation to abuse the process of law, as has been observed in the past. The importers of various end consumer products, mainly tiles and paper, filed hundreds of writ petitions “just to thwart the due process and avoid imposition of duties”. According to him, they have remained successful in their motives and managed to avoid punitive measures at the cost of loss to the domestic industry. In the present WTO regime it is imperative for the states to ensure contemporary ways of governance in order to meet the challenges of globalization.

The domestic industry is paying taxes of billions of rupees and making import substitution of billions of US dollars. The local industry is playing a vital role in reducing the import bill; rather bringing foreign exchange into Pakistan through exports. The economic contribution of these industrial sectors is not hidden from anyone and if these sectors are provided due protection by the government, the potential can be multiplied within a short span of time, representative of the OASIS added.