Potential for a Pakistan – Mercosur FTA

This report titled “Potential for a Pakistan-Mercosur Free Trade Agreement” is part of the PBC’s Market Access Series 2020. The Mercosur bloc- consisting of Argentina, Brazil, Paraguay, and Uruguay- was established in 1991 to promote economic, political, and strategic integration. Pakistan signed a framework agreement on trade with the Mercosur bloc in 2006 with the ultimate objective of signing a PTA with the bloc, however, no significant progress has been made to date.

Pakistan-Mercosur Bilateral Trade

Pakistan’s share in Mercosur’s exports and imports remains less than 0.3%, indicating that Pakistan is not a significant trading partner for the countries in the bloc. Furthermore, bilateral trade has always been in favor of Mercosur. In 2018, Mercosur’s exports to Pakistan totaled $576.6 million while its imports from Pakistan were worth $139.8 million, resulting in a favorable trade balance for the bloc of $436.8 million. Mercosur mainly exports agricultural goods and machinery to Pakistan, with exports growing at a rate of 9.71% over the last ten years. Its major imports from Pakistan consist of textile products with imports growing at a rate of 4.48% in the last ten years.

Pakistan has the potential to increase its exports to Mercosur with the export potential of just the top 25 products amounting to $2.6 billion whereas Mercosur’s actual imports of these commodities from Pakistan was worth just $30.0 million in 2018. From the 25 high potential export items of Pakistan, textile and agriculture have the highest potential. Trade in 20 out of the 25 high potential products did not take place in 2018 indicating Pakistan needs to concentrate on getting market access for these products.

On the other hand, Mercosur’s aggregate export potential to Pakistan of its top 25 products amounted to $6.2 billion while it only exported $114.8 million of these goods to Pakistan in 2018. The bloc has the potential to export goods from the automobile industry worth $2.6 billion to Pakistan. The high potential goods mostly include motor cars and motor vehicles designed for the transport of people. In 2018, Mercosur only exported 2 out of its 25 high potential items to Pakistan in 2018.

The Pakistan Business Council is a research-based business advocacy body composed of the most significant local and foreign investors with long-term commitment to Pakistan. The PBC pursues advocacy free of sectoral and investor origin biases, “Make-in-Pakistan” is PBC’s primary thrust aimed at creating jobs, value-added exports and encouraging import substitution. More information on the PBC and its areas of research are available on our website: www.pbc.org.pk