WORLD TRADE  
ORGANIZATION  WT/COMTD/RTA/2/2 
23 June 2009 
 
 (09-3089) 
Committee on Trade and Development 
Dedicated Session on Regional Trade Agreements Original:   English 
 
 
 
FREE TRADE AGREEMENT BETWEEN PAKISTAN AND SRI LANKA (GOODS) 
 
Questions and Replies  
 
 
 The following communication, dated 18 June 2009,  is being circulated at the request of the 
delegations of Pakistan and Sri Lanka.   The document reproduces the questions addressed to the Parties and the responses submitted. 
 
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Questions from the delegation of the European Communities
  
 
1. Paragraph 7 states:  "The Agreement was signed by Pakistan and Sri Lanka 
(hereinafter referred to as "the Parties") on 1 August 2002 and entered into force on 12 June 2005.  The Agreement was notified to  the WTO by the Parties on 11 June 2008 under 
paragraph 4(a) of the Enabling Clause.  As the preamble and Article I of the Agreement point 
out, the Agreement aims to promote bilatera l trade both in goods and services, although 
negotiations on trade in services are not concluded
1". 
 (i) Why was the Agreement notified with such a delay? 
 
 The delay in notifying the Agreement to the WTO is due to domestic administrative 
procedures. 
 
 (ii) Could the Parties give an outlook and time frame for conclusions of the trade in 
services negotiations? 
 
 Two rounds of services negotiations have alread y been held with a view to concluding the 
proposed Comprehensive Economic Partnership Agreement.  Both the Parties are committed to 
conclude this Agreement as soon as possible. 
 
2. Paragraph 11 states:  "Article 13 of Anne x C prohibits imports containing any inputs 
originating from states with which a Party does not have economic and commercial relations". 
                                                      
1 According to the Parties, as of April 2009, two rounds of negotiations on trade in services have been 
held in January and May 2008. WT/COMTD/RTA/2/2 
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   (i) Which are those countries?  
 
 Parties do not currently apply such measures, and hence do not have a list of such countries at present.  3. Paragraph 16 states:  "In the case of Sr i Lanka, before the entry into force of the 
Agreement 635 tariff lines were duty-free on an MFN basis;  an additional 106 lines became duty-free also on an MFN basis during 2006/07-2008/09 (a total of 11.6 per cent of Sri Lanka's tariff).
2  Upon entry into force of the Agre ement, an additional 135 tariff lines 
(2.1 per cent of the tariff) became duty-free for imports from Pakistan; as a result, 12 per cent 
of Sri Lanka's tariff lines became duty-free corres ponding to 57.7 per cent of imports by value 
from Pakistan.  An additional one line of stainless steel (HS 730630) with an MFN rate of 15 per cent became duty-free in 2008/09.  The implementation period ends in 2010/11 with 82.2 per cent of tariff lines and 71.6 per cent of imports by value from Pakistan being duty-free". 
 (i) Can the Parties confirm that the tariff elimination under the Agreement took 
place within the time frame as foreseen?  
 
 Yes, but with slight procedural delays.  Pakistan has concluded its Tariff Liberalization 
Programme (TLP) for tariff elimination in Ma rch 2009 as per the Agreement.  Sri Lanka will 
conclude its TLP in 2010, as per the Agreement.  
  (ii) Are further negotiations envisaged to achieve tariff elimination for the 
remaining tariff lines in the imports?  
 
 The Parties will engage in further negotiations taking into consideration each others concerns. 
 
4. Paragraph 19 states:  "Pakistan maintains tari ff-rate quotas (TRQs) on products of tea;  
betel leaves (subject to paragraph 22 below);  and articles of apparel, both knitted or crocheted 
and not knitted or crocheted (Attachment III, An nex A).  Annex II of this presentation gives a 
detailed description of the TRQs under the Agreement". 
 (i) On what basis has the level of the TRQs been calculated? 
 TRQs were calculated after mu tual understanding and concurrence.  
5. Paragraph 30 states:  "There are no provisions on export duties and charges in the 
Agreement". 
 (i) Does any of the Parties apply export duties and charges, and quantitative 
restrictions?  If yes, for which products? 
                                                     
 
2 Sri Lanka's tariff is composed of 6,402 tariff lines at HS 6 and 8-digit level, of which: (i) for MFN 
2005/06, 6,316 contain ad valorem  duties, 86 contain non ad valorem  duties.  Of these non ad valorem  duties, 
45 are subject to specific duties and 41 mixed;  (ii) for  MFN 2006/07, 6,312 contain ad valorem  duties, 
90 contain non ad valorem  d u t i e s .   O f  t h e s e  n o n  ad valorem  duties, 46 are subject to specific duties and 
44 mixed;  (iii) for MFN 2007/08, 6,293 contain ad valorem  duties, 109 contain non ad valorem  duties.  Of 
these non ad valorem  duties, 46 are subject to specific duties and 63 mixed;  (iv) for MFN 2008/09, 6,299 
contain ad valorem  duties, 103 contain non ad valorem  duties.  Of these non ad valorem  duties, 45 are subject to 
specific duties and 58 mixed.  For the lines with non ad valorem  duties, ad valorem  equivalents were not 
provided.  The Secretariat has used only the ad valorem  component of the tariff lines subject to mixed duty rates 
in the tariff calculations in this presentation.    WT/COMTD/RTA/2/2 
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   Pakistan has imposed export duties on molass es, some wheat products, metal scrap, pulses, 
and raw and wet blue hides.  There are quantitativ e restrictions on the export of live animals.  
Sri Lanka does not maintain such measures.  
6. Paragraph 38 states:  "A working group on customs related issues, including 
harmonization of tariff headings, was established upon the entry into force of the Agreement.  
The working group meets as often as required and reports the results of its meetings to the Joint Committee (Article XI.3).  The Parties have i ndicated that the working group has produced a 
draft agreement on cooperation and mutual a ssistance on customs matters and is nearing 
conclusion". 
 (i) Could the Parties indicate a time frame for conclusion of this Agreement? 
 The Working Group on Customs Cooperation is functional and has brought up a draft 
Agreement on Cooperation and Mutual Assistance  on Customs matters.  Both countries are 
committed to conclude this initiative as soon as possible. 
 (ii) Does this Agreement also cover trade facilitation issues? 
 Yes. 
 
7. Paragraph 49 states:  "Table II.4 lists the regional trade agreements (RTAs), (notified 
and non-notified to the GATT/WTO and in force) , as of February 2009 to which Pakistan and 
Sri Lanka are parties". 
 (i) How does this Agreement and the obligat ions that are undertaken by the Parties 
relate to the provisions of RTAs concluded by the Parties, in particular SAFTA, 
SAPTA, ECO? 
 PSFTA is based on reciprocity between both Pa rties and it does not affect the obligations 
undertaken in the provisions of other RTAs. 
Questions from the delegation of the United States
 
 
8. We see in Tables II.1A and II.1B that 11.4 per cent of Pakistan's tariff lines and 
17.8 per cent of Sri Lanka's tariff lines will rema in dutiable after full implementation of the 
Agreement.  The remaining dutiable lines cover 25. 4 per cent of Pakistan's total imports from 
Sri Lanka and 28.4 per cent of Sri Lanka's total imports from Pakistan.  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? 
 Under Article XV of the Agreement, the Contr acting Parties can enter into mutually agreed 
frameworks to further eliminate tariffs on items of their interest.   
9. We note that paragraph 3(a) of the Enabling Clause states that "Any differential and 
more favourable treatment provided under this cl ause:  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, 73 per cent of Sr i Lanka's top 25 exports to Pakistan remain 
dutiable under the Agreement, and 24 per cent of Pa kistan's top 25 exports to Sri Lanka 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.   WT/COMTD/RTA/2/2 
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   (i) We would appreciate further clarification from the Parties to the Agreement on 
how the Agreement facilitates and promot es the trade of developing countries 
given that 73 per cent of Sri Lanka's top 25 exports to Pakistan and 24 per cent 
of Pakistan's top 25 exports to Sri Lanka remain dutiable. 
 
 Table A1.3 and A1.4 of the Factual Presenta tion indicate global exports of Pakistan and 
Sri Lanka , and not the top 25 exports to each other.  The FTA was negotiated with the objective of 
trade creation between the Contracting States.  
 
 (ii) What benefits does Sri Lanka see from this Agreement when almost 
three fourths of its top exports into Pakistan will not be duty free under the 
FTA?  
 
 According to the export trade statistics of 2008, among the top 25 products exported by 
Sri Lanka into Pakistan only five products were in the No Concession List.  Further, nine export items 
were in the phasing-out schedule of Pakistan and these products are now eligible for 100 per cent duty 
reduction.  Therefore, 20 of Sri Lanka's top expo rts to Pakistan receive concessions under the PSFTA. 
  Sri Lanka, where more than 50 per cent of our popu lation depend either directly or indirectly 
on agriculture, is of the view that the tariffs of ma jor agricultural exports and particularly rural-based 
agricultural exports to Pakistan have been eliminat ed under the Agreement, which is of great benefit 
to small-scale rural farmers in Sri Lanka.   
 
10. Paragraph 42 on page 14 of the Factual P resentation, which addresses exceptions to the 
Agreement, notes that "Article 2 of the WTO Agreement on Sanitary and Phytosanitary Measures (SPS) is also incorporated into the Agreement allowing a Part y to take action and 
adopt measures it considers necessary to protect public morals;  human, animal or plant life or 
health;  articles of artistic historic or archaeological value;  and national security".   
 (i) We request that the Parties please clarify whether the 
exception applies to the WTO SPS Agreement in its entirety, as in the version of the FTA on the Pakistan Government website (http://www.commerce.gov.pk/PSFTA/PSFTA_Text.pdf
) or if applies only 
to Article 2 of the WTO SPS Agreement as described in paragraph 42 of the 
Factual Presentation.  
 
 Article IV incorporates the WTO agreement on application of Sanitary and Phytosanitary 
Measures.  
  (ii) Regardless of whether the exception applies to the WTO SPS Agreement as a 
whole or to only Article 2, could th e Parties please explain why the WTO SPS 
Agreement is contained in Article IV on General Exceptions?  We do not see the 
WTO SPS Agreement as an exception to  a Member's WTO obligations, but 
rather the WTO SPS Agreement sets out the rights and obligations of Members 
for the measures covered by the SPS Agreement. 
 
 The Article has been incorporated to reaffirm  parties' rights and obligations under the WTO 
SPS Agreement. 
 
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