Third Review of the Pakistan – Turkey Free Trade Agreement

In December 2013, the EU granted GSP+ status to Pakistan starting from January 1, 2014. Since Turkey has a Customs Union with the EU, the assumption was that Pakistan would also have GSP+ access to the Turkish market in line with the concessions offered by the EU to Pakistan. However, Turkey refused to extend GSP+ status to Pakistan and in turn proposed a bilateral FTA between the two countries. The Pakistani government keeping in view the close relations between the two countries decided not to legally challenge the Turkish refusal but to instead enter into negotiations for signing an FTA.

Pakistan's Trade with Turkey

In 2016, bilateral trade was in Turkey’s favor. Pakistan’s exports to Turkey were $237 million while imports were $260 million. The indicative trade potential for Pakistan’s top 10 potential exports to Turkey at HS-06 Level was calculated to $1.6 billion while the top 10 potential imports from Turkey at HS-06 Level were projected as $2.3 billion. While Turkey has the potential to increase the export of motor cars, medicaments, products of iron/steel, tyres etc. to Pakistan, Pakistan can increase its exports of instruments and appliances, cotton yarn, denim etc. to Turkey.

To further evaluate the impact of an FTA, a tariff and trade simulation was conducted to analyze the impact on Turkey’s exports given Pakistan reduces all tariffs for Turkey to 0% as well as an impact on Pakistan’s exports given Turkey reduces all tariffs for Pakistan to 0%. The top 50 commodities at HS-06 Level were analyzed, the result indicates that Pakistan’s exports to Turkey would increase by 22%, while Turkey’s exports to Pakistan would increase by 47%.

This review also includes brief analysis on the Turkish Textile, Automotive and Spare Parts Sector along with an analysis of Pakistan’s Textile Sector.

In order to avail the benefits of the Pakistan – Turkey Free Trade Agreement, Pakistani exporters should be offered market access similar to those offered by Turkey to the Egypt and Jordan. Furthermore, the negotiations must include preventive clauses to ensure that anti-dumping does not apply on certain export items that hold great potential revenue.

The PBC is a private sector not-for- profit advocacy platform set up in 2005 by 14 (now 66) of
Pakistan’s largest businesses. PBC’s research based advocacy supports measures which improve
Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk.

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