Pakistan, US to hold final round of BIT talks

Khaleej Times

Pakistan, US to hold final round of FTA talks


5 January 2006

ISLAMABAD - Pakistan and the United States are holding their crucial and final round of talks here on January 18 to sign the proposed Bilateral Investment Treaty (BIT) that could lead to offering additional $2 billion market access to Islamabad.

Informed sources said that Pakistan has sought additional $2 billion Market access from the United States to increase its exports to that country from the present $3.4 billion to $5.4 billion.

A high powered US delegation is arriving here on 18 of this month to hold talks with the Pakistani authorities to finalise the BIT, in the absence of which, Washington was unprepared to sign Free Trade Agreement (FTA) with Pakistan.

Pakistan was looking for additional market access for further export of its textiles, garments, leather and many other value added products.

The sources claimed that the government has eventually succeeded in convincing the Bush Administration to hold talks on offering more market access to Pakistan. Earlier, the US government was taking the plea that it would not take up the issue including to finalise FTA, unless BIT was signed in order to grab maximum concessions and guarantees for the American investors in Pakistan.

Sources said that since there had been progress on various political and diplomatic issues between the two countries, the US government now looked favourable to offer increased market access to Pakistan after the signing of the BIT. Commerce Minister Humyun Akhtar Khan is believed to have convinced the concerned US officials to hold talks with Pakistan over the issue.

Nevertheless, sources warned that Pakistan will have to carefully negotiate and conclude BIT with the United States as Washington was bent upon introducing harsh clauses in the proposed draft so that in case of litigation, US investors should enjoy certain advantageous position. The United States had earlier signed BIT with about 40 countries including special trade agreements with Canada and Mexico. "And in case of litigation, those countries always suffered financially who concluded BIT and FTA with the US government", a source said adding that Pakistan will have to carefully negotiate the issue with the US team which will remain here from 18 to January 20, 2006.

In the past there was no breakthrough in signing FTA with the United States as it linked the issue with the conclusion of BIT and was reluctant to accommodate Pakistan’s reservations over the issue.

Pakistan had been given the final text of the BIT duly approved by the US Congress and the Bush Administration did not want any change in it. Islamabad, sources said, was told that it was a final text and Pakistan should accept it as was accepted by Singapore, Uruguay and many other countries.

The US has proposed a "confidentiality agreement" in the proposed BIT text which Pakistan argued needed to be changed and that it should be made open so that the investors should not have apprehensions about it.

There was a clause introduced in the final text by the US government that talked about "pre establishment phase of investment" which Pakistan wanted to be excluded.

According to the proposed clause, if any problem arises for the US investor even when he is in the process of establishing his business in Pakistan, he should be compensated through a court of law. Pakistan pleaded when the business has not been set up, how could any US investor be allowed to seek any compensation and that it was an unjust provision which should be deleted from the final text.

Over and above Pakistan was being asked to accept additional 20-page procedure for dispute resolution other than the one to be brought into the notice of the Washington based International Centre for Settlement of Disputes (ICSID) to deal with arbitration clause in case of a dispute between the US investor, any Pakistani government agency, any individual company or a businessman. Pakistan maintained that it would not accept any additional measure being forced by the Americans.

"The Bush government is applying NAFTA standards to sign BIT with Pakistan and this does not favour us", a source said adding that Canada and Mexico were heavily suffering by signing their BITs with the United States due to a number of harsh clauses.

source: Khaleej Times