Undergoing Re-negotiations between Pakistan and China for Free Trade Agreement

Abstract

Pakistan and China have a long history of friendly diplomatic as well as economic relations. Both countries are bounded in a number of bilateral treaties including China-Pakistan Bilateral Investment Treaty (“CPBIT”) and China-Pakistan Free Trade Agreement (“CPFTA”). Recently, both countries are undertaking a joint project namely China Pakistan Economic Corridor (“CPEC”), which is an important part of the Belt and Road Initiative (“BRI”). CPFTA was signed in November 2006 and entered into force in July 2007. Moreover, the two countries signed the Agreement on Trade in Service of the CPFTA in 2009 which came into effect in the same year. Trade and investment volume between Pakistan and China has been increasing as the result of mentioned agreements. Presently, Pakistan has become the second largest trading partner of China in South Asian region. However, CPFTA has been more favorable for China. Chinese exports to Pakistan have increased to an alarming situation, while Pakistani exports to China have not been increased significantly. Therefore, Pakistan’s trade deficit with China has gained the shocking situation. Pakistani producers complain that the CPFTA 2006 was only favoring China. Currently, both countries are re-negotiating the CPFTA in order to create a balanced situation of bilateral trade and investment. The renegotiations are aimed at overcoming the imbalance of trade that exists between