Protectionism and CPEC: A big challenge to face

The CPEC under the Chinese’s ‘Built and Road Initiative’ will change the fate of Pakistan’s economy, a slogan which is talk of the town everywhere in the country with the ruling party raising its voice in favour at every platform.

The multi million dollars investment, which is now touching the mark of 62 billion US dollars with short, medium and long term plans to build road and rail infrastructure, and set up energy plants and special economic zones, appears to be attractive for economic managers of the country in papers. But a segment of the business community does not seem convinced much of it.

The growing influx of Chinese companies and individuals into Pakistan for direct or indirect investments under or sans CPEC scenario on the one hand is a positive sign in terms of increased economic activities, but it is feared to become a troubling sign for Pakistani manufactures and traders in terms of competition, survival of local industry and controlled access to Chinese markets.

[bs-quote style=”default” align=”left” author_name=”Muhammad Faisal Ali Ghumman” author_job=”Group Editor Daily The Business Pakistan” author_avatar=”https://thebusiness.com.pk/wp-content/uploads/2018/07/Faisal.jpg” author_link=”twitter.com/@alfaysal77″][/bs-quote]

China is pursuing the BRI in all regions of the world apparently to create hegemony on global trade and is getting balance of trade in its favour, an irritating factor for countries like United States of America (USA).

Pakistan who is already having negative trade balance with majority of countries has witnessed an abnormal growth of trade deficit with China in the last 10 years. Official figures portray a dismal picture as the trade gap has swelled to approximately $12.7b in 2016-17 from $2.9b in 2007-08.

It is recently reported in the print media that the 9th round of the China Pakistan Free Trade Agreement-II recently held in Beijing concluded without any positive outcome as deadlock over Tariff Reduction Modalities (TRM) persisted.

Pakistani exports to China carry certain limitations because of tariff barriers Chinese government has imposed.

The huge influx of Chinese imports into Pakistan under CPEC and commercial loans for projects appear to be challenging the domestic markets which are already heavy flooded with Chinese products and losing local customers, a blame falls on the policies of the present regime.

Go anywhere in the market and ones finds Chinese cheap and substandard items. The trade bodies in Pakistan have been raising fears and concerns about losing their share in the local markets because of Chinese influence, but the PML-N government seems senseless in realizing the grave danger to protectionism.

If the Pakistani government is giving many waivers including taxes to the Chinese companies for CPEC projects in the long run, it is then bound to compel the Chinese regime to provide level playing field under FTA.

The self-sufficiency and economic independence cannot be achieved until the state does not realize the importance of local industry and ways and means to protect it.

It is feared that the one-sided tilt of the Pakistani government may further damage the local industry and reduce the Pakistani exports to China and other countries.

It is open secret that China is investing in CPEC to cut its transportation route short and save cost for fuel imports by using Pakistani territory and in result Pakistan will somehow get benefit in terms of levies and taxes. But keeping in view the increasing trade deficit at a time when CPEC projects are continuing and cargo activities have generated at Gwadar Port the Pakistani government needs to take up with the Chinese counterparts the sensitive matter seriously.

Throughout the globe, we hardly find any country who do not provide level-playing field to the local and foreign industry. We can cite examples of growing Asian states like India and Bangladesh who always protect their local manufacturing industry through certain subsidies and regulatory duties on imports.

There are reports that Pakistani government is giving top priority to the Chinese companies in all CPEC projects to appease the Chinese government.

It appears that the PML-N government is sparing no time to sign and execute all CPEC agreements in haste to gain political mileage to influence upcoming general elections and without realizing that the balance of trade will go in favour of China.

In my opinion the corridors of powers including army and judiciary should take a dim view of the negative aspect of CPEC in terms of protection to the local industry and declining exports to avoid ballooning go up.

 

CPECFaisal AliProtectionism and CPEC
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