Pakistan is poised to enhance its trade prospects by pursuing the Mercosur Free Trade Agreement, following the cabinet’s approval of an ex-post facto agreement. The agreement marks a pivotal step towards increasing market diversification and expanding Pakistan’s export markets.
Prime Minister Shehbaz Sharif raised concerns over delays in ratifying the Mercosur Free Trade Agreement, emphasizing the urgency of opening new markets. The Ministry of Commerce submitted a detailed framework agreement on trade between Pakistan and Mercosur, a South American trade bloc that includes Brazil, Argentina, Paraguay, and Uruguay.
The Ministry highlighted that this Preferential Trade Agreement (PTA) would serve as a precursor to the full-fledged Mercosur Free Trade Agreement. This move is expected to significantly strengthen Pakistan’s economic and trade relations with Mercosur, which is the fourth-largest trade bloc globally.
Recognizing the potential for market diversification, the Ministry of Commerce explained that South America has been identified as a promising market under Pakistan’s Export Diversification of Strategic Trade Policy Framework (2020-2025). The region represents an untapped market with 270 million consumers, a significant opportunity for Pakistani products.
The agreement has a long history. During Argentina’s Pro-Tempore Presidency of Mercosur, the country proposed signing the framework agreement at the Mercosur annual summit in 2006. While both sides worked together to develop the framework, a prolonged stalemate over the PTA delayed progress. Nonetheless, the federal cabinet had approved negotiations for the PTA, and the Ministry of Commerce was pushing to resume talks.
The Ministry of Law and Justice confirmed that the agreement, being non-fiscal, did not involve budgetary matters, which allowed it to seek the cabinet’s approval swiftly under Rule 16(1)(h) of the Rules of Business, 1973. This rule pertains to the signing of international agreements.
During the cabinet meeting, the prime minister highlighted the vast potential of the Mercosur Free Trade Agreement for Pakistan’s export sector. He stressed the need to finalize the agreement swiftly to explore the South American market and instructed relevant ministries to expedite the process. The government believes that the agreement could unlock significant export opportunities, particularly as Pakistan’s trade with the region remains well below its potential.
Moving forward, the Mercosur Free Trade Agreement is expected to play a crucial role in diversifying Pakistan’s trade partners and reducing its reliance on traditional markets. Ministries were instructed to take stock of all trade-related agreements under review, ensuring timely processing and finalization of outstanding MoUs and agreements.
The Ministry of Commerce sought approval for two critical proposals: the ex-post facto approval of the framework agreement between Pakistan and Mercosur, and the ratification of the agreement. After a thorough review, the cabinet approved both proposals, directing all ministries to prioritize the completion of pending trade agreements and Memorandums of Understanding (MoUs).
