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Skewed Afghan transit trade ‘pact’

Dawn, Pakistan

Skewed Afghan transit trade ‘pact’

By M. Iqbal Patel

16 August 2010

A trade agreement between any two countries is based on mutually beneficial terms while Pakistan has inked the Afghan – Pakistan Transit Trade Agreement that tends to compromise our national interests and will eventually hurt the domestic industry.

During the negotiations with Afghanistan. Pakistani team had put forward the proposals that included (i) drafting of a sensitive list; (ii) maintaining negative list of major smuggling-prone items; (iii) quota restriction to check actual consumption of transit goods in Afghanistan; (iv) bringing Afghan customs tariff at par with the Pakistan customs tariff and increasing duty on items imported by Afghanistan; (v) collection of customs duty on the import of Afghan cargo at Karachi port to be transferred to the relevant bank account of the Afghan government.

Pakistani officials had also identified major smuggling-prone items including fabrics, tyres, electronic equipments like televisions, air conditioners, deep freezers, raw materials and POBB films etc; that meant that the quantity of transit goods should not exceed the actual consumption by Afghanistan. But the Afghan side had demanded complete abolishing of the existing negative list.

Despite Afghanistan’s rejection of most the Pakistani proposals aimed at checking the cross border smuggling, Pakistan agreed to sign the APTTA and it is a serious blow to the constrained business activities.

Pakistani negotiators should have learnt lessons from India which prior to signing transit trade agreement with Nepal, insisted on signing a bilateral trade agreement with a clear objective to develop trade with Nepal, making it totally dependent on the goods manufactured in India.

Under the existing APTTA, Pakistan has lost around $2-3 billion in custom duties and the GST besides an estimated $10 billion illegal transit trade over the last few years.

What made Pakistan to accept conditions of APTTA draft was perhaps the presence of US Secretary of State, Hillary Clinton who played a key role in initiation of talks on the new pact. The US has called the transit deal, one of the most important achievements between the two countries.

The proposed APTTA will not only deprive Pakistan of its substantial tax revenue but it will also deal a serious blow to its trade business and economy. The only positive feature about is that APTTA will provide Pakistan an access to the markets of Central Asian States. But the Afghan government has already imposed 18 per cent customs duty on Pakistani goods apart from many non-tariff barriers to discourage its exports.

Afghanistan hopes that its strategic geographic position will make it a regional transit hub for trade with Central Asia, South Asia the Middle East and China. The Afghan government is playing a dominant role. Instead of providing facilities for the trade growth of Pakistan, it is creating obstacles to restrict its trade. It has made it mandatory for Pakistani traders to get their trade contracts with their Central Asian counterparts, registered with ministries of Afghanistan.

A Pakistani trader has to pay $2000-3000 per container, besides waiting for more than 15 days to get the cumbersome formalities completed. Similarly, the Afghanistan government charges $300 from Pakistani traders per truck on transit consignment through Afghanistan from or to CAR’s.

Moreover, an amount equivalent to 110 per cent of Afghanistan’s customs duties has to be deposited with the authority at the time of Pakistani transit goods entry into their country which is refunded after a deduction of 20 per cent of the deposited amount.

Afghanistan has rejected most of the Pakistan’s proposals but it has extended maximum favour to Indian goods by lowering custom duty at zero rates and 50 per cent concessions on the freight charges for all the Indian exports through the Chahbahar seaport. Pakistan should ask Afghanistan for extension of similar concessions for its exports.