Pakistan Free Trade Agreement with Turkey

In addition, Turkey has conducted negotiations to broaden the scope of its existing free trade agreements in order to update and deepen their scope. In this regard, negotiations with EFTA, Serbia, Bosnia and Herzegovina and Montenegro have been concluded and negotiations with Georgia and Malaysia will be concluded in the near future. The two countries agreed last year during President Recep Tayyip Erdoğan`s visit to Islamabad to increase their bilateral trade volume to $1 billion (TL 8.54 billion) in the short term before reaching the final goal of $5 billion by 2023. He noted that the coherent signing of a free trade agreement, expressed by the business community, would benefit bilateral trade and investment relations and pave the way for greater momentum. “The Turkish government sent a delegation to Pakistan last month and we agreed to improve our trade relations,” said Abdul Razaq Dawood, adviser to the Pakistani prime minister on trade, textiles, industry, production and investment. In today`s world, countries tend to conclude bilateral and regional free trade agreements because the World Trade Organization (WTO) has achieved a high degree of liberalization, WTO rules are not sufficient under current conditions, and the multilateral trading system is ineffective in ensuring better market access. As a result of this trend, about 400 free trade agreements have been notified to the WTO. Özdemir pointed out that in the world`s most populous country, about 700,000 new residential properties are needed every year. Erdogan is on a 2-day visit to Pakistan, where he addressed Pakistan`s parliament, economic forums and meetings with President Arif Alvi and Prime Minister Imran Khan. Negotiations should focus on the elimination of tariffs for high-potential exports, especially those for which the exporter has a comparative advantage and the importer who does not.

It should be pointed out that Turkey`s FTA partners, Egypt and Jordan, with tariffs, are significantly lower than those currently facing Pakistan; Although tariffs on Turkish exports are high, they are equivalent to those on exports from Pakistan`s FTA partners (China, Sri Lanka and Malaysia). Pakistan should also be wary of non-tariff barriers to trade. Tariff elimination alone cannot bring Pakistan`s exports to 2011 levels; these exports can be partially recovered if the trade policy remedies are part of the free trade agreement. The SEF comprises around 71 action points, including a free trade agreement, technology transfer, capacity building and defence cooperation. Turkey negotiates and concludes free trade agreements with third countries in line with the global trend towards the negotiation of free trade agreements and its commitment to the customs union alongside the EU. Together with the EU`s Common Customs Tariff, preferential trade regimes are the most important element of trade policy towards third countries. The EU, which has changed the evolution of framework conditions in the multilateral environment, such as the Doha impasse and the economic crisis, has decided to focus on bilateral trade agreements as a tool to boost growth with the introduction of its new “Europe in the World” trade strategy in 2006. In line with this strategy, in order to increase/maintain its competitiveness in global markets, the EU has started to negotiate free trade agreements with specific provisions on services, investment, public procurement and intellectual property rights. Turkey is preparing for such a changing environment. After starting or starting parallel negotiations with the EU, Turkey is also adapting to the wide range of topics covered by the agreements and is negotiating next-generation free trade agreements with its potential partners. The study concludes that the benefits of a bilateral free trade agreement are skewed in Turkey`s favor.

Turkey`s export portfolio is better suited to Pakistan`s import needs than vice versa; Therefore, it is more likely that Turkey will see an increase in exports after the free trade agreement. Given the potential of both countries to increase their exports to each other, Turkey`s export potential is more than 2.5 times greater than Pakistan`s export potential. While Pakistan has the potential to export $5 billion to Turkey, with the greatest potential ($329 million) in the product “Instruments and Devices for Medical/Surgical/Veterinary Sciences”, Turkey has the potential to export $12.8 billion to Pakistan, with the greatest potential ($346 million) in the product “Motor Vehicles and Other Motor Vehicles. Capacity<= 1,000 cm³". Tariff and trade simulations show that if the two countries had signed a free trade agreement in 2015 that would abolish all tariffs, Turkish exports would increase by 32 percent, while Pakistani exports would increase by only 22 percent. The two leaders pledged to increase bilateral trade, which currently stands at $800 million. Pakistan and the United States began negotiating a bilateral investment agreement (BIT) in 2004 and concluded the text in 2012, but the agreement was not signed due to reservations from Pakistani stakeholders. Pakistan has concluded bilateral investment agreements with Australia, Azerbaijan, Mauritius, Bahrain, Bangladesh, Morocco, Belarus, the Netherlands, the Belgian-Luxembourg Economic Union, Oman, the Philippines, Bosnia, Portugal, Bulgaria, Qatar, Cambodia, Romania, China, Singapore, South Korea, Denmark, Spain, Egypt, Sri Lanka, France, Sweden, Indonesia, Germany, Syria, Iran, Tajikistan, Italy, Tunisia, Japan, Turkey, Kazakhstan, Turkmenistan, Kuwait, Kyrgyzstan, Lebanon, Laos, United Arab Emirates, United Kingdom and Yemen. These investment agreements generally contain provisions on dispute settlement. If a dispute cannot be resolved through mutual consultation, investors can generally bring cases before an arbitral tribunal under the rules of the United Nations International Trade Law Commission, the International Centre for Settlement of Investment Disputes of the World Bank or the Arbitration Tribunal of the International Chamber of Commerce. Pakistan is a member of the Multilateral Investment Guarantee Agency (MIGA), a branch of the World Bank. Pakistan and the United States signed a Trade and Investment Framework Agreement (CIRA) in 2003, which provides a forum to discuss bilateral trade issues.

The last TIFA intercessional meeting was held in Islamabad in May 2019. Pakistan has free trade agreements with Sri Lanka, China and Malaysia. .