WORLD TRADE  
ORGANIZATION  WT/REG237/2 
13 March 2009 
 (09-1262) 
Committee on Regional Trade Agreements Original:  English 
  
 
FREE TRADE AGREEMENT BETWEEN PAKISTAN AND CHINA 
 
Questions and Replies
 
  
 The following communication, dated 5 March 2009, is being circulated at the request of the 
delegations of Pakistan and China.   This document reproduces the questions addressed to the Parties and the responses submitted. 
 
_______________ 
 
 
Questions from the Delegation of Australia
 
 Section II.  Characteristic Elements of the Agreement 
 
1. The Agreement envisages a first phase of tari ff reductions to be completed within five 
years, with a subsequent review and/or modi fication of the tariff reduction schedule in 
2011/2012.  The Agreement does not appear to provide an outer time limit on creation of the FTA.   
(a) What safeguards are there to ensure that the parties will form the FTA 
within a reasonable length of time (Article XXIV.5(b))? 
 China and Pakistan firmly support and abide by the regulations of GATT and WTO in 
relation to the formation of FTA.  As China and Pa kistan are developing countries and some of their 
industries are vulnerable, in light of reducing impact and ensuring smooth transition of the 
Agreement, both Parties would like to choose to eliminate their import duties in two Phases.  Under 
Phase II, the Parties agree to eliminate tariffs on no l ess than 90% of products, both in terms of tariff 
lines and trade volume within a reasonable period of time.  And this would meet the requirement of 
eliminating duties on substantially all the trade.  Article 8 of the FTA enshrines the Bilateral 
Sovereign commitment for this endeavour.   2. Is there an informal plan or schedule ava ilable for the completion of the FTA? 
 No.  It depends on future negotiations under Ph ase II of the Agreement.  But both Parties will 
endeavour to reach consensus on a reasonable and relative short peri od to form a complete FTA on 
the basis of friendly consultation and accommodation of  the concerns of both Parties.  Both countries 
are committed to launch Phase-II of the Agreement as  is provided in Article 8 of the Agreement. 
 
   WT/REG237/2 
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  3. What kinds of ‘modifications’ to the tariff reduction modality are envisaged or provided 
for in the subsequent review? 
(a) Does it provide for slowing tariff reductions? 
 Most of the goods currently listed in vari ous categories for reduction in tariff shall be 
shifted to the category for elimination of tariff.  There is no plan for slowing tariff reductions in the 
commitments already made for elimination/ reduction of tariff in the 1st Phase.  In fact both parties 
may agree to accelerate elimination of import customs duties set out in their Schedules.  
(Article 8 para 3).    
4. Does it provide for further exclusion of pro ducts from coverage, or shifting products 
within the various categories of reduction outlined in paragraphs 14-15. 
 No.  Please refer to Article 8.3 of the Agreemen t “on the request of either Party, the Parties 
shall consult to consider accelerating the elimin ation of import customs duties set out in their 
Schedules.  An agreement between the Parties to a ccelerate the elimination of an import customs duty 
on a good shall supersede any duty rate or staging cat egory determined pursuant to their Schedules for 
such good when approved by each Party in accord ance with their respective applicable legal 
procedures”.  Thus, the stipulation of “modifica tions to the tariff reduction modality” aims to 
accelerate the liberalization process of the Parties when deemed necessary. 
 
Section III:  National Treatment and Ma rket Access Provisions of the Agreement 
 
5. The Agreement entails six different categori es for tariff reductions (paragraph 14).   
(a) What is the practical difference between category ‘no concession’ (category 
V) and ‘excluded’ (category VI)? 
 Category V “no concession” contains highly sen sitive products where no tariff reduction has 
been committed by both Parties in  the 1st Phase.  Category VI is the list of products which are the 
products currently not importable into Pakistan on religious and moral grounds which are allowed by 
GATT in terms of Articles XX and XXI.  
6. Under phase II of the Agreement, the parties h ave agreed to eliminate tariffs on no less 
than 90% of products, both in terms of tariff lines and trade volume. 
(a) Can the parties confirm the basis of these calculations?  Is this 90% of all 
tariff lines across all HS chapters? 
(b) Is the trade volume based on trade be tween the two parties across all HS 
chapters? 
(c) What is the proportion of tariff lines/trade expected to be subject to duty 
elimination in the agriculture and non-agriculture sectors? 
 Under phase II, the parties will eliminate tariffs on no less than 90 per cent of products, both 
in terms of tariff lines and trade volume, which w ould satisfy the WTO’s  requirement on eliminating 
duties on substantially all the trade.  Currently, the Parties could only confirm the further tariff 
elimination will cover the tariff lines and trade volume across most of HS chapters.  The exact 
proportion of tariff lines/trade between the agricu lture and non-agriculture sectors and whether to 
cover all HS chapters is up to future negotia tions under Phase II of the Agreement between the 
Parties.  WT/REG237/2 
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  Questions from the Delegation of Chinese Taipei  
 Trade Environment 
7. According to paragraphs 1 and 3 of the WT O Secretariat’s Factual Presentation, we 
know that this Agreement is Pakistan's first a nd China's fourth bilateral RTA notified to the 
WTO, and that over the period surveyed (1998-2006), Pakistan has run a growing trade deficit 
with China, as shown in Chart I.1 and Chart I.2.  Therefore, we have the following questions: 
(a) How significant is this Agreem ent for each Party’s trade? 
 The Agreement aims to enhance bilateral tr ade and economic cooperation and leads to good 
effect since coming into force from July 2007. 
 
(b) Does Pakistan intend to balance the above -mentioned trade status with China 
through this Agreement? 
 For Pakistan, the FTA has established a mechanis m of flow of FDI from China by eliminating 
tariff on machinery and capital goods.  The Agreemen t also contains an Investment Chapter, which 
not only provides protection to the investment but also contains an incentiv e package for investment 
from China.  After addressing the constraints in supply side, the trade balance with China narrow 
down.  
(c) Have there been any further agreements negotiated on trade in services or 
other sectors between the Parties of this Agreement? 
 In December 2006, China and Pakistan launche d negotiations on Trade in Services, which 
was concluded in December 2008 and signed on 21 February 2009. 
 
(d) What is the concrete impact of this FTA on the trend of these two countries’ 
FDI policies in the future ？ 
 The Chapter IX “Investment” of the Agreement and the trade liberalization under the 
Agreement as well will provide more opportunities fo r the investors of both sides and substantially 
stimulate bilateral FDI flows.  
 
Rules of Origin 
8. According to paragraph 25 of the WTO Secret ariat’s Factual Presentation and Articles 
13 and 17 of this Agreement, we know that a commo dity is considered as originating when it has 
undergone sufficient transformation in accordance with the product specific criteria annexed to 
the rules of origin.  However, no product-specific rules of origin have been  negotiated thus far.  
Therefore, we have the following questions: 
(a) Are the Parties going to negotiate any of these product-specific rules of origin 
as soon as possible? 
 The Parties will negotiate PSR when deemed necessary. 
 
(b) Do the Parties have temporary criteria to identify the sufficient 
transformation of a product from the date of entry into force of this Agreement? WT/REG237/2 
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   In Article 15 of the Free Trade Agreement be tween China and Pakistan, the general rule is 
provided that a product shall de deem ed to be originating if not less than 40% of its content originates 
from a Party.  
(c) Is the concept of “sufficient transformation” different from the concept of 
“substantial transformation” which genera lly applies in the rules of origin? 
 No. 
 
Safeguards 
9. Regarding bilateral safeguards, paragra ph 32 of the WTO Secretariat’s Factual 
Presentation and Article 27.2 of this Agreement state that the other Party may impose a 
bilateral safeguard measure on a product benefi ting from preferential tariff treatment under 
this Agreement if there is an increase in import s in absolute terms and under such conditions as 
to constitute a substantial cause of serious injury  or threat thereof to the domestic industry of 
the importing Party producing a like or directly competitive good.  What are the definitions of 
“increase in imports in absolute terms” a nd “substantial cause” and their criteria for 
justification under this Agreement? 
 Regarding the definition and criteria of the “inc rease in imports in absolute terms”, the Parties 
agree to follow the stipulation of WTO Agreemen t on Safeguards and decisions of WTO Safeguards 
Committee.  While “Substantial cause” refers to the ma in or one of the main causes of serious injury; 
however, it makes more rigorous the investigation to  the application of bilateral safeguard measures. 
Relationship with other Agreements concluded by the Parties 10. Paragraph 47 and Table IV.2 of the Factual Presentation indicate that there are in total 
three bilateral agreements that have not been noti fied to WTO.  Could the Parties confirm when 
they plan to notify them?  Or, please explain the reasons for not notifying these agreements to 
the WTO. 
 With respect to notification of the China-New Zealand FTA, China and New Zealand are 
undertaking the coordination process and will notify to the WTO very soon.  Pakistan is preparing in consultation with Iran and Mauritius to notify the concluded Preferential Trade Agreement to the 
WTO under the Enabling Clause.  
Expropriation 
11. In paragraph 2 of Article 49 of the China-Pakistan FTA, we find that the value of the 
expropriated investments is determined in a ccordance with “generally recognized principles of 
valuation.”  We would like to know if su ch principles provide more advantages in 
implementation than the principle of “fair market value” used by many other FTAs, and what are the advantages, if any? 
 According to our understanding, the terms “gen erally recognized principles of valuation” and 
“fair market value” are of the same implication.     
 
  WT/REG237/2 
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  Settlement of Disputes between Investors and one Party 
12. Instead of adopting “applicable rules of international law,” the China-Pakistan FTA 
adopts “universally accepted principles of inte rnational law” as governing law for Investor-
State Arbitration stated in paragraph 3 of Article 54 of the FTA.  We would like to know whether such an adoption helps arbitral tribunals to make more consistent awards.  If so, please 
explain the content of these “universally a ccepted principles of international law.” 
 The China-Pakistan FTA adopts “universally accepted principles of international law” other 
than “applicable rules of international law” as gove rning law for Investor-State Arbitration.  In our 
mind, “universally accepted principles of internationa l law” is more widely accepted by international 
society than “applicable rules of internationa l law”.  We choose the former phrase aiming at 
facilitating the settlement of disputes between investors and one party. 
 
Question from the delegation of the European Communities
 
 Import Duties and Charges, and Quantitative Restrictions 
 
13. Under paragraph 18 of the Factual Presentation , the EC notes that for Pakistan, a total 
of 36.4% of tariff lines are liberalized under the Agreement, corresponding to 44.4% in terms of 
import values from China for the period 2004-2006.  This means that 63.6% of tariff lines are not included under the Agreement.  In the case of China, a total of 35.4% of tariff lines 
corresponding to 30.3% of imports by value fr om Pakistan for the period 2004-2006 will be 
liberalized under the Agreement. 
(a) Could the Parties provide detailed explanations on how this Agreement 
complies with the obligations set out in GATT Article XXIV of eliminating duties on substantially all trade?  
 The China-Pakistan FTA contains two phases.  Under Phase II, the Parties agree to eliminate 
tariffs on no less than 90% of products, both in terms of tariff lines and trade volume within a 
reasonable period of time.  And this would meet th e requirement of eliminating duties on substantially 
all the trade.  
14. Besides the 63.6% (for Pakistan) and 64.6% (in the case of China) of tariff lines not 
liberalized under this Agreement, Table III.2 sugg ests only very limited liberalization in a 
number of sectors, for example prepared food (I V), plastics and rubber (VII) and also textiles 
and textile articles (XI). 
(a) Could the Parties describe the criteria followed so as to determine sensitivity 
of sectors excluded from full liberalization? 
Both China and Pakistan are developing count ries and have some vulnerable industries 
respectively.  In light of reducing adverse influe nce to these infant industries and ensuring smooth 
transition, after seeking opinions from the relevant  stakeholders, both Parties reached consensus to 
liberalize their import duties in two Phases. 
15. Paragraph 16 and footnote 6 of the Factual Presentation indicate that "the Parties agree 
to eliminate under phase II of the Agreement tariffs on no less than 90% of products, both in terms of tariff lines and trade volume within a reasonable period of time". WT/REG237/2 
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  (a) Could the Parties provide more detail on the expected timetable for this 
second phase?  When are negotiations on  phase II expected to be launched 
and concluded?  
 After Phase I, namely five years after entry in to force of this Agreement, both Parties would 
launch the negotiations and endeavour to reach consensus on a re asonable and relative short period on 
Phase II. 
16. The Parties explicitly indicate that a so -called Phase II of the Agreement will aim to 
complete liberalization by at least 90% of pr oducts.  Based on this statement, the EC 
understands that the Parties do consider that a minimum liberalization of 90% of both tariff lines and bilateral trade should be aimed by this  Agreement.  In doing so, this Agreement would 
be in compliance with GATT Article XXIV a nd would then overcome the liberalization 
shortcomings and incompliance with WTO rules of the current Phase I.  
(a) Could the Parties confirm this? 
 We could confirm that the Agreement will aim to  complete liberalization by at least 90% of 
products.  But we could not accept that current Phase I is incompliance with WTO rules.  In our view, 
for China-Pakistan Agreement, the liberalization wi ll be achieved gradually, and we should not judge 
the legality by only looking at the part of the Agreement.  
Export Duties and Charges 
 17. Paragraph 28 of the Factual Presentation states that the Agreement does not include 
provisions on export duties and charges.  
(a) Could the Parties confirm this?  
 Yes. 
 
(b) If so, could the Parties clarify how many tariff lines (and which ones) and 
how much bilateral trade (in value and in percentage of exports between the 
Parties) are affected by existi ng export duties and charges?  
 Under China-Pakistan FTA, there is no provision on export duties and charges. 
Regulatory Provisions of the Agreement 
 18. The FTA does not cover trade in services.  Article 83 of the Agreement states that the 
Parties shall negotiate trade in services after the conclusion of the negotiations of this 
Agreement.  
(a) Could the Parties provide more details on the timetable for these 
negotiations?  When are negotiations envisaged to be launched and concluded?  
 The negotiation on Trade in Services between China and Pakistan was launched in December 
2006 and concluded in December 2008 and the Ag reement was signed on 21st February, 2009.  
(b) Could the Parties confirm that any co mmitments in services would aim to 
fulfil the requirements set out in GATS Article V?  WT/REG237/2 
 Page 7 
 
 
   Yes.  The Agreement on trade in services meets the requirements set out in GATS Article V. 
On the basis of their WTO commitments, both Parties have provided better market access and national treatment in some sectors and sub sectors.  Th is Agreement will also be notified to the WTO.   
 
19. According to Box II.1 of the Factual Presentation, the Agreement does not include a 
standalone chapter on Intellectual property ri ghts, competition or public procurement.  
(a) Could the Parties explain the rational e for not including more detailed 
provisions on these issues? 
 According to the Agreement, a Free Trad e Commission comprising representatives of the 
Parties was established and regular meetings wo uld be held.  The Commission might consider 
including these provisions during the regular meeti ngs if it deems necessary.  Furthermore, these 
issues might also be discussed during the Ph ase II of the Agreement by the Parties. 
 
20. Paragraph 15 of the Factual Presentation states that the Parties agree to review and 
modify the tariff reduction mo dalities every five years.  
(a) Are the Parties also planning to revie w provisions in other chapters of the 
Agreement such as SPS or TBT? 
The Parties will decide whether to review the relevant provisions of the SPS and TBT 
Chapters in the course of the implementation of the Agreement. 
21. Article 36 of the Agreement states that one of the objectives of the TBT chapter was to 
"[r]educe, wherever possible, unnecessary transact ion costs associated with trade between the 
Parties;" 
(a) Could the Parties define 'transaction costs' and how they relate to technical 
barriers to trade? 
 China understands that transaction costs as stated  in the relevant article of the TBT Chapter 
refers to costs incurred in conformity assessment activities such as inspection, testing, certification 
and collection of information. The above conformi ty assessment activities are all directly related to 
the WTO/TBT Agreement. 
 
Question from the Delegation of Turkey
 
 22. We note that paragraph 8(b) of Article XXIV of GATT 1994 states that "A free-trade 
area shall be understood to mean a group of two or more customs territories in which the duties 
and other restrictive regulations of commerce a re eliminated on substantially all the trade 
between the constituent territories in pr oducts originating in such territories". 
 However, according to paragraph 18 of th e Factual Presentation, by the end of the 
transition period in 2012, a total of 36.4% of  Pakistan's tariff lines are liberalized under the 
Agreement, corresponding to 44.4% of imports by  value from China for the period 2004-2006.  
This means that 63.6% of Pakistan's tariff lines remain dutiable and these correspond to 55.6% 
of Pakistan's total imports from China.   Likewise, according to paragraph 19, by the end of the transition period in 2012, a total of 35.4% of Chinese tariff lines are liberalized und er the Agreement, corresponding to 30.3% of 
imports by value from Pakistan for the period 2004-2006, which means that 64.6% of Chinese WT/REG237/2 
Page 8  
 
  tariff lines remain dutiable and these correspond to 69.7% of China's total imports from 
Pakistan.   We would appreciate clarification from the Parties on how this agreement satisfies the 
conditions of paragraph 8(b) of Article XXIV of GATT 1994 as such a significant portion of 
trade are not liberalized under the Agr eement between China and Pakistan. 
 
 The China-Pakistan FTA contains two phases.  Phase I means within five years after entry 
into force of this Agreement.  Under Phase II, th e Parties agree to eliminate tariffs on no less than 
90% of products, both in terms of tariff lines and trade volume within a reasonable period of time. 
And this would meet the requirement of eliminating duties on substantially all the trade. 
 
Questions from the Delegation of the United States
 
 23. Paragraph 12 notes that “the first review and modification of the tariff reduction 
modality is to be undertaken by the end of 2011 or the beginning of 2012.”  Please clarify the 
need for a review of the tariff reduction moda lity.  What purpose will this review serve?   
During the negotiation of the Agreement, China an d Pakistan reached the consensus that after 
coming into force of this Agreement, “on the request  of either Party, the Parties shall consult to 
consider accelerating the elimination of import customs duties set out in their Schedules” and in the Phase II of the elimination of import customs duties, “both Parties shall endeavour to eliminate the 
tariffs of no less than 90% of products, both in  terms of tariff lines a nd trade volume within a 
reasonable period of time on the basis of friendly consultation and accommodation of the concerns of 
both Parties”.  Thus, the mechanism for the review  and modification of tariff reduction modality was 
set up with a view to further liberalize the trade be tween the two sides after the implementation of the 
Agreement.  
24. Paragraph 15 notes what sounds like a second, separate review: 
“The first review is scheduled to take place either at the end of the fourth year or at the 
beginning of the fifth year after entry into fo rce of the Agreement, i.e. by end 2010 or the 
beginning of 2011 (Article 8).”   
(a) Please explain the difference between th e review noted in paragraph 12 and 
the one noted in paragraph 15.  Why a re they to be conducted at separate 
times? 
Actually, no difference.  The expression in paragr aph 15 is a bit mistaken, “at the end of the 
fourth year or at the beginning of the fifth year af ter entry into force of the Agreement” shall be “by 
the end 2011 or the beginning of 2012”. 
25. Does either Party consider it a possibility th at the tariff reductions committed to in the 
agreement will not be met and that an extension would be required? 
 No.  The Agreement was implemented from 1 Ju ly 2007.  Both Parties have been reducing 
the tariffs according to the schedule of the Agreement. 
26. According to paragraph 14, all tariffs subject to elimination will be duty free within 
three years.  However paragraph 12  uses the term “first phase.”   
 
  WT/REG237/2 
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  (a) What does “first phase” mean?  
 In the Agreement, two Phases were stipulated by both Parties to eliminate import customs 
duties.  Phase I means within five years after entry into force of this Agreement.  In Phase II, the 
Parties will endeavour to eliminate the tariffs of no less than 90% of products, both in terms of tariff 
lines and trade volume within a reasonable period of time. 
 
27. Does the agreement call for tariff elim ination over multiple phases?   
 As written in the Agreement, the Agreement contains two phases. 
 
28. Per paragraph 14, please explain the difference  in tariff treatment for tariff lines subject 
to “no concession (V)” as opposed to tariff lines “excluded (VI).” 
 Category V “no concession” mainly contains highly sensitive products whilst Category VI 
“exclusion” mainly contains some trade-r estricted religious products in Pakistan. 
29. What was the Parties’ basis for determining which products would fall under the five or 
six different categories of tariff reduction moda lities for China and Pakistan respectively?  
 Domestic trade policy and opinions of the stakeholders. 
30. Please explain in detail the rationale for excl uding the vast majority of tariff lines.  
 The China-Pakistan FTA contains two phases.  Phase I is from the July 2007 to 2012.  Under 
Phase II, the Parties agreed to eliminate tariffs on no less than 90% of products, both in terms of tariff 
lines and trade volume within a reasonable period of time.  And this would meet the requirement of 
eliminating duties on substantially all the trade. 
 
31. By the end of the transition period in 2012, China and Pakistan will have eliminated 
duties on only approximately 35 percent of agricultu ral tariff lines.  Please specifically explain 
the low level of liberalization of agricultural products on the part of both Parties. 
 China and Pakistan are both developing count ries with a large population.  Agriculture is 
highly sensitive for both countries.  In order to stabilize the agricultural development and farmers’ 
income, China and Pakistan prefer to liberalize thei r market of agricultural products in a prudent and 
pragmatic manner in the Phase I of the Agreement.  Further liberalization will be made in Phase-II. 
 
32. Please provide the average duty rate by HS  chapter and HS section for the lines that 
remain dutiable. 
 Please refer to Paragraph 21, 23 and Table III.2. 
 
33. Paragraph 16 indicates that “Under Phase II of the Agreement, the Parties agree to 
eliminate tariffs on no less than 90% of produc ts, both in terms of tariff lines and trade volume 
within a reasonable period of time.”   
(a) Please clarify that both  Parties intend to eliminate tariffs on no less than 90% 
of tariffs and  trade.   
  Yes. 
 
 WT/REG237/2 
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  34. Do the Parties intend to cover all HS chapters and sections?  
 Yes, but it still depends on future negotiations  on the basis of accommodation of the concerns 
of both Parties. 
35. What are the Parities’ expectations of what a “reasonable period of time” will be? 
 Currently, we can not predict the exact time span  but what we can predict is that both Parties 
will try their best to reach consensus on a reasonable and relative short period on the basis of friendly 
consultation and accommodation of the concerns of both Parties.  
36. Please explain why the Parties chose to delay negotiation of duty elimination on 
products other than those for so-called Phase I.   
 Both China and Pakistan are developing countri es.  Some of their industries are vulnerable.  
In light of reducing impact and ensuring smooth tr ansition of the Agreement, both Parties would like 
to choose to eliminate their import duties in two phases.  
37. We understand from the Parties’ WTO notifica tion that they consider this an agreement 
“leading to the formation of [a FTA],” in the words of GATT Article XXIV:7.  A “FTA” is 
defined in Article XXIV:8 as a group of customs territories in which, inter alia , “duties…are 
eliminated  on substantially all the trade” between tho se territories.  In other words, where an 
agreement does not specify the duty elimination fo r products accounting for “substantially all 
trade”, such an agreement would not constitute  one “leading to the formation of” a “FTA” 
under the terms of GATT Article XXIV.  It would appear from a straightforward reading of 
GATT Article XXIV:7 and 8, therefore, that in order to understand whether the particular 
agreement meets the requirements of GATT Articl e XXIV, one must look to the text of the 
agreement to determine whether duties on a suffi cient number of products will in fact be 
eliminated.  In this light, please explain wher e in the Pakistan-China agreement we can find a 
schedule of duties identifying those pro ducts for which this agreement requires duty elimination  
by a date certain. 
 China and Pakistan firmly support and abide by the regulations of GATT and WTO in 
relation to formation of a FTA.  Therefore, under phase II, no less than 90% of products, both in terms 
of tariff lines and trade volume would be eliminated within a reasonable period of time, which would 
cover substantially all the trade of the Parties.  38. According to paragraphs 18 and 19, for Pakistan, duties are eliminated on a total of 
36.4% of tariff lines under the Agreement, corresp onding to 44.4% of imports by value from 
China for the period 2004-2006.  For China, duties are eliminated on a total of 35.4% of tariff lines under the Agreement, corresponding to 30.3% of imports by value from Pakistan for the 
period 2004-2006.  
The China-Pakistan FTA contains two phases.  Under Phrase II, the Parties agreed to 
eliminate tariffs on no less than 90% of products, bot h in terms of tariff lines and trade volume within 
a reasonable period of time.  And this would meet the requirement of eliminating duties on 
substantially all the trade.  
39. We ask that the Parties please explain their understanding of the term “substantially all 
trade.”  Do the Parties agree that, under any reading of “substantially all trade”, the 
elimination of duties on significantly less than 50 % of tariff lines and trade value fails to satisfy 
that standard?  WT/REG237/2 
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  The China-Pakistan FTA contains two phases.  U nder Phrase II, the Parties agree to eliminate 
tariffs on no less than 90% of products, both in terms of tariff lines and trade volume within a reasonable period of time.  And this would meet th e requirement of eliminating duties on substantially 
all the trade.  40. Given the limited set of duties proposed to be eliminated under the specific terms of this 
agreement, could the Parties please explain how their tariff elimination commitments achieve 
the “substantially all trade” standa rd set out in GATT Article XXIV?  
 The China-Pakistan FTA contains two phases.  Under Phase I, for China, duties of 35.5% of 
all lines would be eliminated and for Pakistan, 35.6%  of all lines be eliminated; at the same time, 
duties of 49.5% and 48% of all lines for China and Pakistan respectively would also be reduced. 
Under Phrase II, the Parties agree to eliminate tari ffs on no less than 90% of products, both in terms of 
tariff lines and trade volume within a reasonable period of time.  And this would meet the requirement 
of eliminating duties on substantially all the trade. 
41. According Annex 1, Tables AI.3 and A.4:   
Pakistan's top 25 exports to China cover a tota l of 57 HS 8-digit tariff lines.  A total of 
21  HS 8- digit tariff lines, equalling 37% of Paki stan’s top exports, are excluded from tariff 
liberalization and thus remain dutiable.  
China's top 25 exports to Pakistan cover a tota l of 78 HS 8-digit tariff lines.  A total of 
37 HS 8-digit tariff lines, equalling 47 percent of China’s top exports, are excluded from tariff liberalization and thus remain dutiable.   
(a) What is the justification for excluding  from tariff elimination top exports 
from both Pakistan and China, given their obvious trade significance?  
 Among these top exports, under Phase I, tariff of these products are treated in different ways, 
i.e., eliminated, reduced or otherwise, for the consid eration of different development status of related 
industries.  However, under Phase II, tariff of these pr oducts would be further eliminated to reach the 
target of eliminating no less than 90% of products, both in terms of tariff lines and trade volume. 
 
42. Do the Parties intend to eliminate tariffs on  top export products under the hypothetical 
tariff elimination envisioned for Phase II? 
 Both Parties would endeavour to eliminate tariffs on these top export products as much as 
possible under Phase II. 
Safeguards 43. With regard to safeguards, there appears to be no mechanism for the imposition of 
provisional bilateral safeguard measures.  Can the Parties please confirm this?  
 There is no mechanism for the imposition of provisional bilateral safeguard measures. 
44. The FTA permits the imposition of safeguard measures for a period not to exceed two 
years, with a possible one year extension.  Ho wever, the FTA does not appear to require the 
liberalization of the measure in effect for more than one year at regular intervals during the 
period of application, as required by Article 7.4 of the WTO Safeguards Agreement.  Could the 
Parties please confirm this? WT/REG237/2 
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   There is no such requirement in the Agreemen t.  But this does not prevent the parties to 
liberalize the measure in effect for more than 1 year at regular intervals during the period of 
application according to the real situation of the domestic industry. 
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