China Pakistan Free Trade Agreement (CPFTA)

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China Pakistan Free Trade Agreement (CPFTA)

Free Trade Agreements (FTAs) are treaties between two or more countries to promote trade without any hindrance, and thus to ensure smooth outflow of goods and service across the countries territory.

There is a long history and theory behind the formation of FTAs. One of the earliest concepts which supported FTAs was comparative advantage theory given by the Economist David Ricardo. This theory states to overall increase the production of the world by producing at its lowest opportunity cost, but it would only possible with the assumption of zero tariff and free movement of capital. Therefore, on the basis of this theory free trade areas were developed to enrich trade benefits.

A very young organization, Which regulates FTAs was formed in 1995 is known as the World Trade Organisation( WTO). It was successor to the General Agreement on Trade and Tariff (GATT) and was formed under the Marrakesh Agreement to control all bilateral and multilateral agreement between different nations.

Pakistan and China were among founding members of WTO and are two close neighbouring countries with a young age of 72 and 70 years respectively. Pakistan and China have long term friendly relations which are termed as all Weather Friendship. These relations were further strengthened with Pakistan when china changed its neutral position for Kashmir and took a stance that the Kashmir issue must be resolved in accordance with the wishes of Kashmiris people. To carry these relations steps ahead, In April 2005, Government of Pakistan and Government of the Peoples Republic of China started negotiations and reached to an Free Trade Agreement in November 2006 at Islamabad Pakistan. Further in year 2009, China and Pakistan signed Trade in Service. Which objective was to enhance cooperation between countries in terms of distribution, marketing and delivery of services etc.

CPFTA Consumer Provisions

CPFTA is termed for Free Trade Agreement between Pakistan and China. CPFTA implies the elimination of Tariffs for goods generating from both countries and deals against anti-dumping measures in the form of trade remedies.

CPFTA has a lot of provisions that ensure consumer protection through its provisions. First of all, CPFTA starts with the objective to promote public welfare within both countries. CPFTA comply with WTO measures and ensure compliance of all United nation guidelines by ensuring protection of consumers through its regulations. Agreement ensure application of Sanitary and Phyto-sanitary Measures (SPS) in accordance with WTO objectives. CPFTA chapter of SPS and its article emphasize the protection of humans and animals life or health. Further, article 42 ensure publication of any changes to SPS by posting on WTO website so other members and general public must be aware with recent changes.

CPFTA chapter deals with technical barriers to trade and its article states to reduce cost between both parties which ultimately led to lower cost for goods and services for ultimate consumers. Term of consumers in FTAs can be extended to investors as well. Investors are also consumers as dealing in other countries. This is reason, it is said educated investor is better protected consumers. Chapter XI of CPFTA discuss detailed rights about investors from both countries. It gives all rights and protection without any future discriminatory measures against investors from any countries. Following chapter article 49 ensure no country will nationalize or expropriate any investment with any particular reasons. Article 50 of investment chapter ensures even in case of riots, national emergency and war, parties and consumers will be compensated by state if they have been effected . These provisions promote people from both countries to invest and purchase in others countries with full support of Chinese and Pakistani government. CPFTA also ensure there must be resolve of dispute settlement through diplomatic channels where both states will step in and try to resolve the issues. There are detailed article and sections which promote arbitration to resolve dispute settlement between parties. These are CPFTA consumer provisions that are very important in todays world to kept evolving with time.

Should there be Consumers Protection Provision in FTAs

As Individual empowerment is one of world biggest mega trend, which led to raise of voices against wrong doers and unethical practices. This is reason Governments have started including more provisions for consumers in theirs FTAs to not only give more rights to consumers but also further enforce their domestic regulations through FTAs.

In modern world, business sell their customer information to third parties those who use it for their own advantages without consent of consumers. In case of Pharamcy2U v ICO (2015), UK largest NHS-approved online pharmaceutical company was held liable by for 130000 pounds for selling their customers data to marketing company. Therefore, It is responsibility of involved states to protect consumer information while interactions with businesses. Customer information is not being leaked or pass onto third party whether its B2B market or B2C market information across the borders. There is big business of selling business data to other business in china which impact impact the privacy of local consumers and other countries consumers dealing with Chinese companies. This is a reason, PRC government has passed cyber security law in year 2017 to protect unauthorised use of personal information.

World Trade Organisation demand states to ensure consumers get safe products which are safe from all type of risk. Aim of FTAs is not only to improve economy of involved countries but also provide consumers better quality goods and services which they could not have avail without these agreements. Having such type of provisions will be compliance of WTO measures of Technical Barriers to Trade (TBT) and ultimately safer products to consumers.

Different countries have domestic regulations for imports and exports. Australian border force have prohibited certain goods which cannot be imported. These provisions further enforce domestic regulations through FTAs with other nations as well.

Consumers get effected by misleading and deceptive conduct of business even across the borders. Consumers buying products online especially are misrepresented in terms of quality and price. Thus, there must be provisions for customer where people can report their problem in case of frauds, overcharge and poor quality products across the border. These are reason, why OECD started global awareness to educated consumers against scammers and product safety. Hence, having these provisions for consumers in FTAs will boost consumer trust on businesses across the borders and will increasing trade among participating countries. [16: ‘Safety Of Products Sold Online – OECD’, Oecd.Org (Webpage, 2019) .]

Lot of countries dont get freely access to basic goods and service which are very important for survival. Approximately 1.6 million Africans died of malaria, tuberculosis and HIV-related illnesses in 2015.These diseases can be prevented or treated with timely access to appropriate and affordable medicines. Therefore, especially in case of developing countries where people dont have access to all medication, those countries must set mechanism to get those medicine without any delays as part of their FTAs. Pakistan is the latest country to suffer with severe dengue outbreak, but Pakistan dont have enough dengue medication. So, Government of Pakistan ensure mechanism to get this medication from any specific country with whom they are already dealing as part of their FTAs. That will ensure smooth outflow of medication into country.

Analysis and Recommendations

Though, its very important to have consumer provisions in FTAs but provisions need to effective and relevant for general people. Comparing CPFTA with other countries FTAs highlight big differences. CPFTA does not have adequate consumer protection provisions in CPFTA and in Trade in services. Whereas, EU-Vietnam agreement have detailed chapter for services and e-commerce and aim to promote electronic trade. CPFTA has set our rules on investment, on other hand EU-Korea and EU- Vietnam had also address these measures. CPFTA also deal with SPS and TBT like other FTAs. But being very realistic, compliance of SPS and TBT itself does not constitute enough consumer protection.

There is increasing trend of e-commerce in Pakistan, as 2.3 times e-commerce payments has increased in year 2018. Therefore its very important for both Governments to involve e-commerce trade rules and its related provisions to have updated agreements and change their rules according to changing demand of people. These will create easiness for both countries consumers to trade online. Moreover, having chapters and provisions for consumers on E-Commerce is not enough in Trade in services . There must be domestic institutions in Pakistan and china that work for awareness of consumers while purchase of good and services online. As Australian Competition and Consumer commission has full guidelines for general public how to protect from scammers and in case consumers are subject to scam and misleading conduct, and how ACCC will rescue effected consumers. Both Governments should also scrutinize those online sellers and are certified rather than just including these provisions in FTAs. This will prevent consumers from any type of misleading conduct by sellers. Consumer effective provisions will led to better choices to consumers and will make better standard of living in country.

Pakistan initiated another round of dialogue with after receiving complaints by sellers of Pakistan that CPFTA are more in favour of china and to which these both countries made amendments. Which means there are sellers and producers protections provisions too.

Having more consumers provisions in Trade in services for e-commerce and its related provision will make consumer experience very good and which might led too much negative balance of payment for countries. Especially Pakistan has negative balance of payments from so many years and further easiness for consumers will create more pressure on their trade account. They will prefer more goods from china through e-commerce. Following picture shows how every year Pakistan imports from china are increasing.

Therefore, too much consumer provisions in FTAs varies from country to country. Here in given context, more provisions might benefit big economy of china and consumers in both countries but it would overall impact Pakistan economy negatively. If country is developing where people dont prefer to online shopping across the border there is not much need for Ecommerce provisions for consumers in FTAs. In case of Pakistan, one fifth of population only use internet and big market is cash based where people prefer in person shopping. According to current financial position of Pakistan, China is considered as biggest reason for trade deficit. Pakistan only exports fruits and vegetables and small value goods, whereas in return get machinery and high tech goods from china. To rescue its currency, Pakistan get its loan from china and this is reason china is claimed as problem and solution for Pakistan. Moreover, Pakistan has a small developing economy and critics argue about FTAs, that these are made for the enactment of foreign policy rather than bilateral economic benefits. Powerful countries use these FTAs to impose their will over smaller power countries and the same case goes with Pakistan.

Therefore, there must be consumer provision with parallel legislation which does not impact economic conditions and same time protect consumer as well. With given scenarios, it can be concluded that provisions are essential in this modern world otherwise there is no mean of making free trade areas if consumer are not confident or dont have any protection. Simultaneously, It must be ensured with basic provisions, current situations of country must be consider before having provisions in FTAs.

Reference List

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