An official from the Pakistani Commerce Division has confirmed that Pakistan will be offered access by the Chinese government for three products, namely rice, sugar and yarn.
The exports of rice into China have already begun, as the shipment deal was confirmed and agreed to by PM Imran Khan when he visited Beijing and Shanghai in November of last year. Under this agreement, approximately 200,000 tons of rice will be exported to China, while 300,000 tons of sugar will also be exported.
The total value of the exports of rice and sugar is estimated to be worth $300 million. At the same time, Pakistan is also set to export $700 million worth of yarn. However, the latter of these exports may seem to be troublesome for both trading partners as Pakistan does not have enough surplus yarn to export to China.
The exports to China are expected to grow and reach $2.2 billion in the upcoming year and $3.2 billion for the next year, reported Dawn.
The Commerce Division official also said that changes within the Pak-China Free Trade Agreement (PCFTA) are also expected and the news of this will be deliberated on April 2. The official informed that Pakistan will be granted admission for 301 tariff lines, which will increase exports which at this point in time are exponentially low.
New exports: a game changer for Pakistan?
With respect to the allowance that China has now granted Pakistan, in the case of these three products, Pakistan’s exports will definitely receive a boost and this will help with not only the Current Account but also with the Balance of Trade.
An export deal worth a billion dollars may not seem like quite a lot, but in the context of Pakistan where the fifth most exported good (cereals) is worth $1.75 billion, an influx of a billion rupees through the exports of yarn, sugar and rice, will definitely place Pakistan on the road to export growth and economic gain.
According to the relevant sources, roughly 200,000 tons of rice and 300,000 tons of sugar will be exported to China in this year. If this bodes true, then the Pakistani manufacturers or exports of these products will also receive a monumental boost not only in terms of revenue but also in product efficiency and quantity of production.
Yarn, which is a bi-product of cotton, could be more difficult to produce as Pakistan’s cotton production is not under a massive surplus and, not to mention, the extracted cotton is the second most exported Pakistani product in the world. Therefore, if Pakistan has to export $700 million worth of yarn to China, than it has to come up with a way or system to increase the cotton output. Another solution could be to allocate more of the exported cotton to China and make the availability of cotton in the international markets lower than it is at the moment. However, this is a drastic measure and is not very viable.
In hindsight, Pakistan’s exports have never really been competitive and have had a lackluster performance in the international markets. Pakistani exports have constantly been overshadowed by tariffs and quotas that constantly increase its prices and reduce the quantity available in the international market. However, the PCFTA could be a turning point for the country’s export competitiveness.
The PCFTA saw the removal of 36% of the tariff lines between China and Pakistan, which means that Pakistani goods are cheaper to China and vise-versa. All in all, if the plan and agreement between China and Pakistan is implemented properly it will prove to be a game changer for Pakistani exports.
For more insight into the export and trade condition of Pakistan, click here.