The Preferential Trade Agreement between Mauritius and Pakistan (hereinafter “the Agreement”), is the fifth RTA notified by Mauritius to the WTO and the ninth RTA notified by Pakistan to the WTO.

In 2014 Mauritius had a GDP of US$12,616 million and a population of 1.2 million, compared to Pakistan whose GDP in 2014 was US$246,876 million, with a population of 185 million. Mauritius was ranked 97 and 99 in terms of world merchandise exports and imports, with exports valued at US$2,662 million and imports at US$5,607 million, compared to Pakistan whose rank in 2014 was 48th and 36th in exports and imports with a value of US$24,722 million for exports and US$47,544 million for imports.

Their trade to GDP ratios are considerably different, 115.8 for Mauritius and 32.9 for Pakistan during 2012-2014. In 2014 the broad composition of trade of the Parties were similar, with exports dominated by manufactures especially for Mauritius (74.7% of total exports, and 56.7% for Pakistan), while manufactures and fuel imports are important for Pakistan (49.7% and 34.4% respectively) and manufactures and agricultural products for Mauritius (56.1% and 23.3%).

Bilateral trade between the Parties is relatively small. In 2014 Pakistan was the 26th largest source of imports for Mauritius (0.6% of total imports) and the 38th largest export destination (negligible export share) while Mauritius was Pakistan’s 48th largest source of imports (negligible share of total imports) and 62nd largest export destination (0.1% of total exports). In terms of total and bilateral merchandise trade between the Parties for the period from 2004-2014, both Parties ran a widening trade deficit globally. In their bilateral trade Mauritius had a trade deficit with Pakistan during this period although the figures on bilateral trade reported by the Parties show considerable differences, with Pakistan showing a reduction in its trade surplus with Mauritius since 2010, the decline is less clear from figures reported by Mauritius.

For product composition of trade by broad HS Sections of the two Parties, in their bilateral and global trade, two references periods are used: 2004-2006, before the Agreement entered into force, and the most recent three year period for which data are available, 2012-2014. Of Pakistan’s two largest categories of exports during 2004-06, textiles, and vegetable products, which accounted for 74% of its global exports, were also Mauritius’ main imports from Pakistan (accounting for 93% of Pakistan’s imports from Mauritius). During the period 2012-2014 these two categories remained Pakistan’s two largest exports globally and accounted for the two largest categories of imports by Mauritius from Pakistan. Of Mauritius’ three largest export categories in 2004-06 (textiles, prepared foods and machinery, which accounted for 77% of its global exports), only machinery accounted for 11% of Pakistan’s imports from Mauritius; Pakistan’s other main imports from Mauritius during this period were base metals, chemicals, and wood pulp (accounting for 73% of its total imports from Mauritius). In 2014-16 the situation was unchanged, with Mauritius’ key global exports remaining textiles, prepared foods and machinery (73% of total exports). Pakistan’s imports from Mauritius however were dominated by motor vehicles (92% of its imports from Mauritius).

Characteristic Elements of the Agreement

Background Information

The Agreement was signed on 30 July 2007 and entered into force for both Parties on 30 November 2007. It was notified to the WTO pursuant to Paragraph 4(a) of the Enabling Clause on 30 September 2015. The text of the Agreement is available on the Parties’ respective websites:

• Mauritius – Pakistan PTA

The Agreement consists of 25 Articles and three annexes A, B and C which form an integral part of the Agreement.

The objectives of the Agreement are to strengthen the Parties’ economic and commercial relationship; increase their volume of bilateral trade in goods and services; promote a more predictable and secure environment for the sustainable growth of bilateral trade; expand mutual trade by exploring new areas of cooperation; facilitate trade diversification; encourage further competition amongst their enterprises; and contribute, by the removal of barriers to trade, to the harmonious development and expansion of bilateral and world trade (Article 1). The provisions of the Agreement are to be interpreted in light of these objectives and decisions of the Joint Trade Committee established by the Agreement. The Committee shall observe the applicable rules of international law in making its decisions (Article 2).

Provisions on Trade in Goods

Import duties and charges, and quantitative restrictions

The Parties agree to provide national treatment to each others’ imports (Article 8). The Agreement shall not apply to preferences already granted or to be granted by any Party to third parties through bilateral, plurilateral and multilateral trade agreements or similar arrangements outside the framework of the Agreement (Article 7).

Article 4 of the Agreement on Scope and Coverage clarifies that it applies to trade between the Parties for the products specified in Annexes A and B, and the tariff preferences indicated therein. Article 5 clarifies that initially a preferential trade agreement will be established through the reduction and/or elimination of tariffs as indicated in the Annexes. However, upon the request of either Party, the Parties shall consider accelerating the elimination and/or reduction of tariffs set out in the Annexes, or to include new products. If there is an agreement to accelerate tariff reductions or elimination or include new products under the scope of the Agreement, it shall supersede any duty or staging category specified in Annexes A or B as approved by each Party in accordance with the provisions of the Agreement and its applicable legal procedures.

In addition, the Parties will identify measures, exchange information and negotiate with a view to eliminating all para-tariff5 and non-tariff barriers and any other equivalent measures on the movement of goods (other than imposed in accordance with Articles 13 and 14 on safeguards and anti-dumping and countervailing measures or after holding consultations under Article 20). They also commit to not increase existing para-tariffs or introduce new or additional para-tariffs without mutual consent upon entry into force of the Agreement. The Parties indicate that they currently have no para-tariffs in place. Furthermore the Parties agree to hold further consultations to consider further liberalization of their bilateral trade (Article 6).

The Parties may amend and develop the provisions of the Agreement through mutual consent, taking into account the experience gained through its application (Article 23).

• Liberalization of trade and tariff lines

Annexes A and B to the Agreement contain concessions respectively, by Mauritius to Pakistan and by Pakistan to Mauritius. Mauritius provides margins of preference over its MFN applied rates for the products listed ranging from zero to 100% in the first year following entry into force of the Agreement, followed by further liberalization in the second year, ranging from 33% to 100%. Pakistan provides a margin of preference of 50% at entry into force of the Agreement, followed by full liberalization at the end of the first year for the products listed in Annex B. In this regard Pakistan has indicated that it, like Mauritius, also implemented its tariff reductions on 30 November 2007, when the Agreement entered into force, and then on 30 November 2008 instead.

Mauritius’ tariff liberalization commitments for imports from Pakistan under the Agreement: In 2007, when the Agreement entered into force, around 79% of Mauritius’ tariff was duty free on an MFN basis, corresponding to 97.5% of its average annual imports from Pakistan during 2004-2006. In 2007, Mauritius liberalized 5 tariff lines for imports from Pakistan followed by 44 lines in 2008, corresponding to 0.2% of its imports from Pakistan during 2004-2006. Following full implementation of the Agreement 20.2% of the tariff will remain subject to duty for imports from Pakistan, corresponding to 2.2% of imports from Pakistan.

Pakistan’s tariff liberalization commitments for imports from Mauritius under the Agreement: In 2007, when the Agreement entered into force, 400 tariff lines (5.8%) were duty free on an MFN basis and under which 48.8% of Pakistan’s imports from Mauritius entered in 2004-05. In 2008 Pakistan liberalized tariffs on 75 lines or 1.1% of its tariff lines. Imports under these lines were negligible from Mauritius during 2004-06. As a result of full implementation of the Agreement, 93.1% of Pakistan’s tariff will remain subject to duties for imports from Mauritius, under which around 51.2% of imports from Mauritius entered Pakistan during 2004-06.

In addition to tariff elimination, Mauritius has committed to reduce tariff rates on 48 tariff lines (0.8% of the tariff). The lines correspond to around 1.2% of Mauritius’ average imports from Pakistan in 2004-2006. The products concerned include: flowers, vegetables and fruit, food preparations, tobacco products, wood and articles of wood and other made up textiles. The duties are reduced, in most cases, by a margin of preference of 50% of the MFN applied tariff.

• Liberalization schedule

Mauritius will eliminate tariffs only in HS Sections XV (base metals) and XXI (works of art) once implementation is complete. For most HS Chapters there is no difference between the final applied MFN and preferential duties for lines remaining dutiable. The HS Chapters for which Mauritius provides tariff preferences to Pakistan and where the final preferential average tariff for imports from Pakistan is lower than the corresponding MFN average are: HS 6 (live trees and other plants), 7 (edible vegetables), 8 (edible fruit and nuts), 19 (preparations of cereal), 24 (tobacco and manufactured tobacco substitutes), 44 (wood and articles of wood), and 63 (other made up textile articles). The differences in the average rates range from 2.2 percentage points in HS 7 to 15 percentage points for HS 6; Chapters 61 and 62 (articles of apparel and clothing) contain specific duties for which no ad valorem equivalents were available.

At the end of implementation Pakistan will retain tariffs across all HS Sections, eliminating some tariffs under HS Sections II, III, IV, VI, X, XI, XV, XVI and XX. There is no difference between average applied MFN and preferential tariffs by HS Chapter. Average (preferential and MFN) applied tariffs range from 5% for HS Chapters 31 (fertilizers), 81 (other base metals), and 88 (aircraft), to 71.3% for HS 22 (beverages, spirits and vinegar).

• Tariff rate quotas

Pakistan provides additional preferential market access through tariff rate quotas (TRQs) for textiles and clothing products as listed in Annex B of the Agreement.

The TRQs apply to products in Chapters 61 and 62 (articles of textiles and clothing) and provide either a 35% or 40% margin of preference over the applied MFN rate, which in 2007 was 25%. The preferential rate applies to imports of 200,000 or 300,000 pieces per tariff line per year. Mauritius does not provide TRQs under the Agreement.

Rules of origin

Article 11 and Annex C to the Agreement define the Agreement’s rules of origin. The Agreement confers origin on products that are wholly produced or obtained in the territory of the exporting Party; products not wholly produced in the territory of the exporting Party also qualify for preferential treatment if the total value of the materials, parts or produce originating from outside the territory of the exporting Party does not exceed 65% of the FOB value of the product and provided that the final process of manufacturing takes place within the territory of the Party and has undergone sufficient processing. Sufficient working or processing is defined by the Agreement as a change in tariff classification (CTC) at the HS six-digit level. Minimal operations and processes listed in Article 7 are not to be included in calculations of sufficient processes, nor is it necessary to establish whether power, fuel, plant and equipment and machines and tools used to obtain the final products originate in third parties (Article 6). Product specific rules are to be defined at a later stage. According to the Parties this has not been formally discussed so far.

Bilateral cumulation between the parties is permitted as long as the value addition in the exporting Party is at least 25% of the FOB value of the product concerned, and that the aggregate value addition in the territories of the Parties is at least 35% of the FOB value of the product (Article 8).

Under Article 10 goods that are directly transported without passing through the territory of third parties are considered to be directly consigned. Goods that are transported through third parties, with or without transhipment or temporary storage, can be considered originating if the transit is justified for geographical reasons or for transportation requirements. Such products should not have entered into trade or consumption in the third party, nor any operation other than unloading and reloading or any operation required to keep them in good condition. Products that have undergone subsequent production or any operation outside the territories of the Parties other than operations necessary to preserve them in good condition or to transport them to the territory of the importing Party, shall not be considered originating.

Certificates of origin as described in Schedule B to the Annex are required for products to be determined eligible for preferential treatment (Article 13). The Certificate shall be issued by an authority designated by the Government of the exporting Party, and notified to the other Party in accordance with procedures described in Schedule A (on operational procedures for the rules of origin) to the Annex. The Parties will cooperate to specify the origin of inputs in the Certificate; take measures necessary to address, to investigate and where appropriate to take legal and/or administrative action to prevent circumvention of the Agreement through a false declaration concerning country of origin or falsification of original documents; and cooperate fully, consistent with their domestic laws and procedures, in instances of circumvention or alleged circumvention of the Agreement, to address problems arising from circumvention, including by facilitating joint plant visits and contacts by representatives of the Parties upon request and on a case by case basis. If a Party believes that the rules of origin are being circumvented, it may request consultations to address the matter to seek a mutually satisfactory resolution. The consultations are to be held promptly (Article 15).

The rules of origin may be reviewed as and when necessary, upon request by either Party, and may be modified as mutually agreed (Article 16).

Export duties and charges, and quantitative restrictions

There are no specific references in the Agreement to export duties and charges or quantitative restrictions on exports.

Regulatory Provisions of the Agreement

• Standards

Sanitary and phytosanitary measures

Sanitary or phytosanitary measures are to be applied to the extent necessary to protect human, animal or plant life or health and should not be prepared, adopted or applied so as to create unnecessary obstacles to the Parties’ mutual trade or to protect domestic production. SPS measures applied pursuant to the Agreement shall be based on internationally established scientific principles and supported by sufficient evidence, taking into account the availability of relevant scientific information and regional conditions (Article 18).

Technical barriers to trade

Under Article 17 the Parties agree to ensure that standards or technical regulations are not prepared, adopted or applied so as to create unnecessary obstacles to their mutual trade or to protect domestic production. They must fulfil legitimate objectives taking into account any risk factor, including available scientific and technical information as well as the intended end use of products.

• Safeguard mechanisms

Safeguard measures may be taken where any product is imported into the territory of a Party in such a manner or in such quantities as to cause or threaten to cause serious injury in the territory of that Party. In such cases, the Party affected may take a safeguard after prior consultations with the other Party, except in critical circumstances, by suspending provisionally the preferential treatment accorded to the product concerned by the Agreement (Article 13).

Any suspension must be notified to the other Party and the Parties shall enter into consultations to reach a mutually acceptable agreement through the Committee established by the Agreement. The consultations shall take place in accordance with the provisions of Articles 20 and 21 of the Agreement (consultations and dispute settlement respectively).

The Agreement also has a prohibition and shortage clause which allows imports to be prohibited under certain circumstances (Article 15).

• Anti-dumping and countervailing measures

Anti-dumping and countervailing measures may be taken by the Parties under Article 14. For anti-dumping, where the Party determines that dumping8 is taking place in its territory of products originating in the other Party, it may impose an anti-dumping duty on the products concerned, if it determines that the dumping causes, or threatens to cause, material injury to domestic industry or to retard materially the establishment of a domestic industry.

The Parties are also free to apply countervailing measures in accordance with the provisions of the relevant WTO Agreements in cases where prices are influenced by unfair trade practices such as subsidies. No such measures have been taken to date according to the Parties.

• Subsidies and State-aid

There are no explicit provisions relating to subsidies and State-aid in the Agreement.

Article 16 permits the Parties to maintain or establish a State trading enterprise as provided for under Article XVII of GATT 1994. Each Party shall ensure that a state trading enterprise falling under its jurisdiction acts in a manner consistent with the provisions of the Agreement and accord non-discriminatory treatment in imports from and exports to the other Party.

• Customs-related procedures

Article 12 on Customs valuation states that matters relating to customs valuation are to be governed by Article VII of GATT 1994 and the WTO Agreement on the Implementation of Article VII of GATT 1994. Customs related procedures are also contained in the provisions on the rules of origin and Certificates of Origin.

• Other regulations

Article 15 permits the Parties to restrict imports from each other if this is necessary to remove or forestall a serious shortage, or threat thereof, of a product essential to the exporting Party. The Parties indicate that they have not taken any such measures to date.

Sector-Specific Provisions of the Agreement

There are no sector-specific provisions in the Agreement.

General Provisions of the Agreement

Transparency

Under Article 9 of the Agreement the Parties agree to ensure transparency in their relevant regulations and practices through publication of these regulations. They will also notify each other of existing and new measures which pertain to or may affect the operation of the Agreement. Furthermore, where any regulation, practice or notification has been made by a Party in a language other than English, an English translation of the text will be provided to the other Party.

Current payments and capital movements

There are no provisions on current payments and capital movements under the Agreement. According to the Parties, this issues will be discussed if the Agreement is expanded or under FTA arrangements.

Exceptions

The Parties agree not to apply measures in a manner so as to constitute an arbitrary or unjustifiable discrimination, or a disguised restriction on their mutual trade. Subject to this commitment, nothing in the Agreement shall preclude prohibitions and/or restrictions on imports or exports of products, which are justified on the grounds of public morality; religious values; national security; the protection of human, animal and plant life and health; the protection of national treasures possessing artistic, historic or archaeological value; the protection of exhaustible natural resources and genetic reserves; or regulatory restrictions on trade in gold or silver. Furthermore, nothing in the Agreement shall be understood to require either Party to provide any information, the disclosure of which is contrary to its essential security interests (Article 10).

If a Party wishes to apply an exception as provided for by the Agreement, it shall notify the other Party and accord sympathetic consideration to any representation that may be made by that Party.

Under Article 15 of the Agreement, import prohibitions by the Parties are permitted for products containing any inputs originating in any third party that the Party does not provide diplomatic recognition to or that is not covered in its trade policy. Any such prohibition must be notified to the other Party immediately.

Accession and Withdrawal

There are no provisions for third parties to accede to the Agreement. Either Party may terminate the Agreement through a written notification to the other Party. The Agreement shall terminate six months following the date of the notification (Article 22).

Institutional framework

The Agreement in Article 19 establishes a Joint Trade Committee consisting of Officials of the Parties. It shall review progress made in the implementation of the Agreement, including the review of notified para-tariff and non-tariff barriers, and any other functions under the Agreement. It shall meet initially within three months of the entry into force of the Agreement and at least once a year thereafter. It shall set out its rules of procedure at its first meeting and shall set up any sub-committees and/or working groups for any specific purposes it may consider necessary. According to the Parties, the Joint Trade Committee has not met yet. The last Joint Working Group meeting held in 2014 recommended that the Joint Trade Committee and the Sub-Committee on Customs matters be established. The latter has been established and met in September 2015 in Islamabad.

Pakistan: the Joint Trade Committee has not yet been convened. Any bilateral issues under the PTA are handled at the Joint Working Group Forum.

Dispute settlement

Article 20 deals with consultations, while Article 21 contains dispute settlement provisions. Under Article 20 each Party shall accord sympathetic consideration and adequate opportunity for consultations regarding any representations that may be made by the other Party on any matter affecting the operation of the Agreement. Such consultations shall take place in the Committee formed by the Agreement which shall meet at the request of other Party to consider any matter falling under the Agreement.

Any dispute between the Parties on the interpretation and application of the provisions of the Agreement or any instrument adopted within its framework concerning the rights and obligations under the Parties shall be amicably settled through consultations. While under Article 20, “consultations” serve the purpose of discussing any matter related to the operationalization of the Agreement, consultations under Article 21 are for resolving disputes that may arise between the Parties. Where a request for consultations is made pursuant to Article 21, the other Party shall, unless mutually agreed otherwise, reply to the request within 15 days of its receipt and enter into consultations in good faith, no more than 30 days after the date of receipt of the request, or any other period mutually agreed by the Parties, with a view to reaching a mutually satisfactory solution. If the requested Party does not respond to the request or enter into consultations in this period of time, the matter shall be dealt with in accordance with the working procedures drawn up by the Committee.

The consultations will be confidential and without prejudice to the rights of the Parties in any further conciliatory proceedings. Any dispute not settled within 30 days or any other period as agreed, the consultations shall be referred to the Committee which shall resolve the dispute according to its working procedures.

Relationship with other agreements concluded by the Parties

The Parties in Article 2 affirm their existing rights and obligations with respect to each other under the Marrakesh Agreement established the WTO and other treaties or agreements to which they are signatories.

Government procurement and Intellectual Property Rights

There are no provisions on Government procurement or intellectual property rights in the Agreement.

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This report, prepared for the consideration of the Preferential Trade Agreement between and Mauritius and Pakistan, has been drawn up by the WTO Secretariat on its own responsibility and in full consultation with the Parties. The factual presentation reproduces as closely as possible the terminology used in the Agreement and in the comments provided and does not imply official endorsement or acceptance by the Secretariat of such terminology.