Pakistan's Free Trade Agreement
In 2005, Pakistan reached a free trade agreement with China that eventually took effect in 2007. A free trade agreement is a bilateral agreement between two or more nations that promotes commerce across common borders. The most notable measure is the removal or minimalism of tariffs.
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Details of the Agreement
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The China-Pakistan free trade agreement has two phases. The first phase, which began July 1, 2007, implemented an 85 percent reduction in tariffs on both sides of the agreement. During this phase, China reduced tariffs on livestock, textiles, aquatic products, mineral products and vegetables, while Pakistan reduced tariffs on chemicals, machinery products, mutton and beef. The second phase will not begin until 2013, and requires an elimination of tariffs on at least 90 percent of goods.
Benefits
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Current trade levels between China and Pakistan are expected to triple by 2012 as a result of this agreement. The trade volume could go beyond 15 billion dollars. Aside from obvious economic benefits, the agreement also serves as a friendly tie between the two nations, making them allies.
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Issues
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The most critical issue involving any free trade agreement, the Pakistan-China agreement included, is the behavior of businesses when left uncontrolled by the government. Government intervention can prevent monopolies, insure fair practices, and crack down on labor issues. Free trade also allows the private sector free reign in determining what it sells to foreign countries, including goods that may compromise the overall welfare of the nation.
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References
- Photo Credit Pakistan Kohistan 07 image by Arnim Schulz from Fotolia.com
