WORLD TRADE  
ORGANIZATION  WT/COMTD/RTA/3/2 
2 September 2009 
 (09-4121) 
Committee on Trade and Development 
Dedicated Session on Regional Trade Agreements Original:   English 
 
 
 
CLOSER ECONOMIC PARTNERSHIP AGREEMENT BETWEEN  
PAKISTAN AND MALAYSIA (GOODS) 
 
Questions and Replies  
 
  The following communication, dated 1 September 2009, is being circulated at the request of the delegations of Pakistan and Malaysia.  
 This document reproduces the questions addressed to the Parties and the responses submitted. 
 
_______________ 
 
 
Questions from the delegation of Australia
 
 
1. We note that by the end of the transition period Malaysia will maintain duties on 
9 per cent of agricultural lines (Annex I, Paragra ph 3).  To what agricultural products do these 
lines correspond? 
 The agricultural products which will remain dutia ble by the end of the transition period of the 
Malaysia-Pakistan Closer Economic Pa rtnership Agreement (MPCEPA) include: 
 
• live animals, 
• meat and edible meat offal, 
• preparations of meat, 
• fish products, 
• liquid milk and cream;  e.g. yogurt, 
• birds' eggs, 
• round cabbages, 
• edible fruits and nuts;  e.g. desiccated coconuts and tropical fruits,  
• rice, 
• margarine; edible mixtures or preparations of anim al or vegetable fats or oils or of fractions of 
different fats or oils, 
• alcohol and alcoholic beverages,  
• tobacco products, and modified starches, glues and enzymes. 
 2. Pakistan has not given Malaysia preferenti al treatment for agricultural products in 
HS chapters 1, 5, 13, 16 and 24 (Annex I, Ta ble AI.5).  Is there any provision in the FTA to 
undertake further liberalization in agriculture in  future, either for areas already partially 
liberalized or where no liberalization occurs,  i.e. HS chapters 1, 5, 13, 16 and 24?  WT/COMTD/RTA/3/2 
Page 2  
 
   Pakistan has provided substantial preference to pr oducts of HS chapters 1, 5, 13, 16 and 24.  
For further details please see Pakistan's schedule at http://www.commerce.gov.pk/PMFTA/PM-
Pakisan_Schedule.pdf . 
  There is a provision under Article 130 of the MPCEPA which stipulates and provides for a 
general review of the Agreement to  be undertaken after five years of the date on which the Agreement 
entered into force and every five years subseque ntly after that, unless otherwise agreed by both 
Parties.  In addition, the article also allows fo r a review of the tariff concessions and commitments 
under trade in goods stipulated in Annex 1 of the Agreement to be done in 2009.  3. We note that by the end of the transition  period tariffs will continue to apply to 
55.8 per cent of Pakistan's tariff lines, corresponding  to 80.3 per cent of imports from Malaysia.  
What plans do the Parties have the increase the percentage of tariff lines subject to duty-free 
treatment in the future?  
 Article 130 of the MPCEPA Agreement provides fo r a general review of the Agreement to be 
undertaken after five years of the date on which the Agreement entered into force and every five years 
subsequently after that, unless otherwise agreed by both  Parties.   In addition, the article also allows 
for a review of the tariff concessions and commitment s under trade in goods stipulated in Annex 1 of 
the Agreement to be done in 2009.   At this juncture, Parties have no definite plans to increase the 
percentage of tariff lines subject to duty-free treatment.  Questions from the delegation of Brazil
 
 4. Are the preferences granted for goods prod uced with materials imported with 
suspension or elimination of duties and taxes? 
 There are no preferences granted for goods produ ced with materials imported with suspension 
or elimination of duties and taxes. 
 
5. Are there any plans to implement digital certificates of origin, with digital signature? 
 Currently, in order to facilitate  exporters, Malaysia implements a digital, online application 
system called the ePCO system whereby exporters can  apply for certificates of origin (COs) online.  
However, implementation of digital COs with di gital signatures has yet to be implemented. 
 
Questions from the delegation of the European Communities
 
 6. Paragraph 17 of the Factual presentation not es that Part 1 to Annex 1 lists the tracks 
relating to the tariff treatment accorded by th e Parties;  these are common to both Parties 
except the category "Tariff Rate Quota" (TRQ) whic h is specific to Malaysia.  The tracks can 
be grouped in four main categories providing  respectively for tariff elimination, tariff 
reductions, TRQs, and excluded products.  The fi rst category provides for a "fast track" on 
tariff elimination ending on 1 January 2009 and a "normal track" ending in 2012.  The second category includes three "sensitive tracks", two of which provide for tariff reductions to rates of 5 per cent and 10 per cent by 2014 and one for tariff reductions to a rate of 20 per cent by 2011;  
two more tracks on "margin of preference" (MOP ) provide for tariff rates being reduced on a 
margin of preference basis reaching a 20 p er cent MOP by 2011 in the case of MOP1 and 
10 per cent and 15 per cent MOP by 2010 for MOP2.  The TRQ category only applies to 
Malaysia which reserves the right to maintain TR Qs as set out in Section I-B of Part I of 
Malaysia's schedule to the GATT 1994.  Part 4 to Annex 1 contains the schedule of TRQs 
applied by Malaysia under the Agreement;  this lis ts the products subject to TRQs, the in-quota 
duty-free volume allocated to Pakistan, and the ou t of quota rates.  The last category provides  WT/COMTD/RTA/3/2 
 Page 3 
 
 
  for the Parties' "Exclusion List" and "Highly Sensitive List" (HSL) of products;  products 
placed under the HSL remain unbound but subject to review in 2009. 
(i) Could the Parties explain on what grounds the level of the TRQs was calculated? 
 Malaysia's schedule on TRQ is consistent w ith the GATT 1994 Agreement.  The 17 lines of 
TRQ products offered under MPCEPA are TRQ produc ts declared under the Uruguay Round.  The 
levels of TRQ were calculated based on the historical trade performance of year 2004. 
 
(ii) With respect to the exclusion list and hi ghly sensitive list, could the Parties 
confirm whether the foreseen review will take place in 2009 as scheduled? 
 The whole of Annex 1 including the Exclusion Li st and the Highly Sensitive List is subject to 
review. 
 
7. Paragraph 18 indicates that either Party may upon notification to the other Party, 
accelerate the implementation of concessions or  expand upon them and by mutual agreement 
modify or withdraw  any concession provided in Annex 1 (Article 15).  The Parties agree to 
undertake a general review of the Agreement in th e fifth calendar year following its entry into 
force and every five years th ereafter, unless otherwise agreed by them (Article 130). 
(i) Could the Parties confirm on what grounds concessions can be withdrawn?  
What is the mechanism to trigger such withdrawal?  
 This provision was agreed to address any un foreseen or exceptional circumstances.  Actions 
under this provision would be unde rtaken upon mutual agreement. 
 
8. Paragraph 19 highlights that other general provisions of the Agreement include the 
prohibition to introduce or maintain any non-tari ff measures on the bilateral import or export 
of goods which are inconsistent with the Pa rties' obligations under the WTO Agreement.  
Furthermore, the Parties undertake to identify non-tariff measures (NTMs) which are creating 
unnecessary restriction to trade and to eliminate them in accordance with a timeframe to be 
mutually agreed upon. 
(i) Have the Parties made progress in identifying NTMs?  Have any deliberations 
taken place on this subject? 
 The Parties are in the process of identifying NTMs.  The deliberations would take place after 
the completion of this exercise. 
 
9. Table III.2 provides Pakistan's tariff elim ination under the Agreement by years and 
duty range.  In this respect, the Federal Board of Revenue of the Government of Pakistan (FBR) 
issued a Statutory Regular Order (SRO) on 11 December 2007 to enter into force on 1 January 2008.
1  However, according to our informatio n, this SRO has not been revised or 
reviewed since (for the duty phase-out period to start in 2009).  
(i) Could both Pakistan and Malaysia confirm that the implementation of the 
Agreement's commitments is taking place as scheduled?  
 Both Parties have implemented their respective obligations under the MPCEPA. 
                                                      
1 The SRO is available online:  http://www.commerce.gov. pk/SROs/1205-111207.pdf   WT/COMTD/RTA/3/2 
Page 4  
 
  10. Tables III.2 and III.6 show that 55.8 per cent of Pakistan's tariff lines and 24.6 per cent 
of Malaysia's tariff lines will remain dutiable aft er full implementation of the Agreement.  The 
remaining dutiable lines cover 80.3 per cent of Pa kistan's total imports from Malaysia and 
20.5 per cent of Malaysia's total imports from Pakistan.   
(i) Do the Parties have any plans to make further commitments in terms of 
coverage in order to ensure that tariffs are eliminated on more trade between 
the Parties? 
 Yes, pursuant to Article 130 of the Agreement. 
 
(ii) Could the Parties describe the estimated economic benefits of such low 
liberalization efforts in comparison to broader liberalization concessions?  
 The benefits not only consist of short-term gains but also l ong-term goals such as in economic 
and technical cooperation.  Furthermore, the Ag reement provides for both Parties to review the 
concessions with the purpose to broaden the coverage in  future.  Bilateral trade has increased since the 
implementation of the MPCEPA. 
 
(iii) Could the Parties explain the apparent disparity in ambition as regards the 
respective liberalization schemes? 
 Liberalization commitments under the MPCEPA have taken into consideration each Party's 
interests, concerns and levels of  development.  The concessions offe red by the Parties have been done 
in consultations with the respective stakeholders. 
 
(iv) Could Pakistan indicate the benefits in  terms of trade enhancement from only 
committing to liberalize 19.3 per cent of its bilateral trade with Malaysia?  
 Pakistan will be eliminating or reducing tari ff on 86 per cent of tariff lines covering a major 
portion of bilateral trade.  The concessions offered by Pakistan have been done keeping in view the 
general trade regime of the country and in consultations with the stakeholders. 
 
(v) Could Pakistan explain the reasons for not having committed to liberalize any of 
those tariff lines with rates above 30 per cent (Paragraph 22)?  
 Most of these tariff lines relate to auto sect or which is a nascent industry in Pakistan. 
 
(vi) Could Malaysia explain the reasons for ex cluding most of the products in the 
higher tariff ranges and for not having co mmitted to liberalize any of those tariff 
lines with rates above 50 per cent (Paragraph 28)?  
 Under the MPCEPA, Malaysia has committed to reduce the tariffs on many of the products in 
the high tariff range.  Further liberalization or ta riff concessions of these products will be considered 
when the general review of the Agreement is unde rtaken.  However, certain products have been 
excluded from tariff concessions due to security, health and moral reasons.  
 
11. Paragraph 3(a) of the Enabling Clause states that "Any differential and more favourable 
treatment provided under this clause shall be de signed to facilitate and promote the trade of 
developing countries […]".  However, accord ing to Annex 1 of the Factual Presentation, 
Tables AI.3 and AI.5, 15.8 per cent of Malaysia 's top 25 exports to Pakistan remain dutiable 
under the Agreement while 20.1 per cent of Paki stan's top 25 exports to Malaysia remain 
dutiable.  It is not clear how this Agreement sa tisfies the conditions of paragraph 3(a) if duties 
on those goods that are the most highly traded between the Parties are not eliminated under the 
Agreement.    WT/COMTD/RTA/3/2 
 Page 5 
 
 
  (i) Could the Parties clarify how the Agree ment facilitates and promotes the trade 
of developing countries given that 15.8 per cent of Malaysia's top 25 exports to Pakistan and 20.1 per cent of Pakistan's top 25 exports to Malaysia remain dutiable? 
 Enabling Clause permits the developing count ries to reduce applied  most favoured nation 
(MFN) tariff and does not bind them to eliminate ta riff.  Preferential tariffs would promote bilateral 
trade.  After the implementation of the Agreement bilateral trade has increased. 
 
12. Table III.4 depicts Pakistan's tariff elimin ation under the Agreement, by HS Section.  
The average MFN rate for items under Section VIII Hides and Skins is 9,8 per cent, with 
34 tariff lines apparently enjoying duty-free tr eatment already on MFN basis.  However, 
according to the Statutory Regulatory Ord er (SRO) 1011 of 2005, Pakistan has imposed a 
regulatory duty of 20 per cent on raw and wet blue hides and skins since 2005 (http://www.fbr.gov.pk/newcu/sros/2005/2005sro1011.pdf
).    
(i) Could Pakistan clarify the duties applied under HS section VIII in 2008?  Are all 
tariff lines that are subject to the 20 per cent duty included in the group of 30 
tariff lines not liberalised under the agreemen t?  Or has this SRO been revised 
in the light of the Agreement? 
 Regulatory duties are not imposed on imports from Malaysia under preferential tariff. 
 
13. Whereas 59.2 per cent of Pakistan's imports from Malaysia are concentrated in animal 
and vegetable fats and oils (HS III), Table III.4 sh ows that only 4 of the 55 tariff lines under this 
HS Section will be liberalized in 2012.  Furthermo re, Table A1.5 of Annex 1 indicates that the 
degree of tariff preference granted by Pakistan  on the 51 tariff lines that remain dutiable under 
the Agreement appears to be very limited:  the average rate would be 12.9 compared to 13.8 at 
MFN basis.  
(i) Could Pakistan explain whether there w ill be a degree of variation among these 
51 lines or will the same degree of tariff preference be granted on all 51 lines? 
 There are 55 tariff lines at 8 digit HS in Pakistan's schedule of concession out of which no 
concessions is on 31 tariff lines.  On the remain ing tariff lines concessions under various tracks have 
been offered to Malaysia.  14. Paragraph 38 of the Factual Presentation states that the Agreement does not include 
provisions on export duties and charges.  
(i) Do any of the Parties apply export duties and charges, or quantitative 
restrictions?  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 existing export duties and charges?  
 Pakistan is not maintaining any quantitative restrictions (QR).  However, Pakistan has 
imposed export duties on certain products which ar e available at Pakistan's Customs website 
www.fbr.gov.pk
.  These duties are regularly reviewed and the bilateral trade of these products is 
negligible.  
 Export measures are in accordan ce with  Malaysia's interna tional obligations, to promote 
environmental research and development and to ensu re sufficient domestic supply.  Information of 
products subject to export measures is listed under Malaysia's "Customs Act 1967: Customs 
(Prohibition of Exports) Order 1998" i.e. First, Se cond and Third Schedules, and can be obtained at 
the Malaysian Customs website ( http://www.customs.gov.my
). WT/COMTD/RTA/3/2 
Page 6  
 
   
15. For the purposes of both the SPS and TBT Chapters respectively, the Parties agree to 
establish focal points with a view to facilitating consultations between the Parties.  
(i) Could the Parties describe the role of these  focal points?  Have these focal points 
been established yet? 
 The role of focal points is given in Articles 59 and 67 of the Agreement.  In case of SPS, the 
focal points have been established.  
(ii) Will regular meetings take place in an institutionalised format?  
 Yes. 
 
(iii) If related meetings have already taken place, could the Parties describe the 
progress made so far in those two areas? 
 To date, no meeting has been conducted yet. 
 
(iv) Do the Parties intend to review the provisions of these two Chapters in the 
coming years? 
 The general review envisaged under Article  130 of MPCEPA, may consider reviewing 
provisions of the SPS and TBT.  
Questions from the delegation of the United States
 
 
16. According to Paragraph 17 of the Factual Presentation, the Parties' review of the 
"Highly Sensitive List" scheduled for 2009 has not yet occurred.  When do the Parties plan on meeting to discuss potential liberalization of products in the "Highly Sensitive List"? 
 Review meeting will be held by the end of 2009. 
 
17. We found the titles for Charts III.1 and III.3 to be somewhat confusing, and suggest that 
they be edited to clearly note that data is  only for those lines that remain dutiable.   
(i) We recommend that Chart III.1 be renamed "Pakistan:  Average rates for lines 
that remain dutiable, by HS Section". 
(ii) We recommend that Chart III.3 be renamed "Malaysia:  Average rates for lines 
that remain dutiable, by HS Section". 
 Explanation and formatting of the Factual Presentation (FP) is under WTO Secretariat's 
purview.  These two questions should be directed to the WTO Secretariat.    
18. It is unclear to us what information Char ts III.2 and III.4 are conveying.  Could the 
Parties please clarify and perhaps consider ma king the titles of the charts clearer?   
 Explanation and formatting of the Factual Presentation (FP) is under WTO Secretariat's 
purview.  This question should be directed to the WTO Secretariat.   WT/COMTD/RTA/3/2 
 Page 7 
 
 
  19. According to Tables III.2 and III.6, it appears that 55.8 per cent of Pakistan's tariff lines 
and 24.6 per cent of Malaysia's tariff lines will remain dutiable after full implementation of the 
Agreement.  The remaining dutiable lines cover 80. 3 per cent of Pakistan's total imports from 
Malaysia and 20.5 per cent of Malaysia's total imports from Pakistan.   
(i) Do the Parties have any plans to make further commitments to narrow this gap 
and ensure that tariffs are eliminated  on more trade between the Parties? 
 Parties may consider further commit ments when the review is undertaken. 
 
(ii) Can the Parties please explain the di sproportionate level of commitments 
undertaken between the two Parties in terms of eliminating duties? 
 The concessions have been offered in consulta tions with the stakeholders and with mutual 
consent of both Parties.  
(iii) What benefits does Malaysia see from this Agreement when only 19.8 per cent of 
its exports into Pakistan will be duty free under the Agreement? 
 Since the implementation of the MPCEPA, Malays ia's trade with Pakistan has recorded an 
annual growth of more than 30 per cent.  Malaysia's  exports to Pakistan that enjoy tariff concessions 
under the MPCEPA accounted for 70 per cent of total exports, valued at US$1.2 billion.  In addition, 
MPCEPA provides for a general review of the Agreement with a vision to review the tariff 
concessions and commitments under this Agreement to broaden the coverage. 
 20. We note that Paragraph 3(a) of the Enabling Clause states that:  "Any differential and 
more favourable treatment provided under this clau se:  shall be designed to facilitate and 
promote the trade of developing countries".  However, according to Annex 1 of the Factual 
Presentation, Tables AI.3-AI.4, 64.7 per cent of Malaysia' top 25 dutiable exports to Pakistan 
remain dutiable under the Agreement, and 34.6 per cen t of Pakistan's top 25 dutiable exports to 
Malaysia remain dutiable under the Agreement.  It is not clear how this Agreement satisfies the 
conditions of Paragraph 3(a) if duties on those goods that are the most highly traded between the Parties are not eliminated under the Agreement .  We would appreciate further clarification 
from the Parties on how the Agreement facili tates and promotes the trade of developing 
countries given the high percentages export s that remain dutiable under the Agreement. 
 Enabling Clause permits the developing countri es to reduce applied MFN tariff and does not 
bind them to eliminate tariff.  Preferential tariffs would promote bilateral trade.  After the 
implementation of the Agreement bilateral trade has increased.   The Parties would endeavour to further libera lize and expand bilateral trade when a review 
takes place, as there is a provision in the Agreemen t that enable both Parties to undertake a general 
review under Article 130 of the MPCEPA. 
 
__________