Tariff Abolished Import Growth Of Pakistan?

The protocol on the revision of the free trade agreement between the government of the People's Republic of China and the Islamic Republic of Pakistan government (hereinafter referred to as the protocol) came into effect on December 1, 2019. The ratio of tax items to zero tariff products between China and Pakistan will gradually increase from 35% to 75%. Pakistan cotton, cotton yarn, grey cloth and other exports to China at last have "zero tariff" (enjoy the same "treatment" with Vietnam's cotton yarn imports).

Some international traders, investment institutions and domestic weaving enterprises generally believe that Pakistan cotton yarn will enter the Chinese market in 2020 and will seize the market share of cotton yarn from Vietnam, India, Indonesia and Central Asia. Some India cotton mills and exporters also said mournfully that "zero tariff" will make China's imports of Pakistan cotton yarn rapidly surpass India yarn and challenge Vietnam's yarn dominance. India cotton, cotton yarns and grey fabrics are likely to be forced to gradually withdraw from the Chinese market.

Will the Pakistan cotton yarn flood into the Chinese market if the tariff is abolished? The author's view is stimulating and promoting, but it is unrealistic to assert that the import of Pakistan will increase violence. The India cotton mill has some "worries". The reasons are summarized as follows: (Pakistan cotton mill is generally small in scale, weak in delivery capacity and low in yarn quality stability).

First, the Pakistan cotton mill in 2019/20 needs a lot of high priced imports of American cotton, Brazil cotton, West African cotton, Central Asian cotton and so on, coupled with rising labor costs, resulting in the price competitiveness of cotton yarn is not strong. Pakistan's total cotton production and quality declined sharply in 2019/20, and the geopolitical relationship with India (imported large quantities of cotton in India) plunged.

Two, Pakistan cotton mill and cotton yarn importing enterprises should share "a cup of soup" from the advantages of "tariff cancellation". According to the survey, since December, the export demand of Pakistan has increased by 2%-3% as a result of China's demand driven by the Sino Pakistani free trade agreement. Among them, 30S and 32S combed yarn rose by 0.08 US dollars / kg, US $0.09 / kg respectively, and combed 20S-40S yarn increased by US $0.10-0.12 / kg. Chinese weaving factories and traders reflect the difficulty of receiving.

Three, the trend of RMB depreciation in 2020 is becoming more and more obvious. The cost of imported cotton yarn is rising. Some institutions analysis, considering the completion of the annual economic goals and the goals of 2020, the RMB exchange rate will be supported by domestic policies, so the RMB exchange rate does not have the possibility of significant depreciation in December. But considering that Trump is facing impeachment and presidential choice, he needs to get some popularity and votes from the chaotic situation. Coupled with the expansion of the US fiscal deficit, we need to rely on external taxes to hedge against internal pressure. Therefore, the probability that the US Federal Reserve will continue to cut interest rates to give RMB pressure in 2020 will be great.