Pakistan wins EU's GSP Plus status
By Syed Fazl-e-Haider
The European Parliament on Thursday granted "GSP (Generalized Scheme of Preferences) Plus" status to Pakistan, allowing the country to pay lower duties on their exports to the European Union. With GSP plus status, the country's exports would be exempted from the general rules. The EU Parliament approved the move for GSP Plus status with 409 to 182 votes for 10 developing countries, including Pakistan.
Access to GSP Plus status means duty-free access or lower duties for all Pakistani products, but it is subject to implementation of human rights conventions signed by the country at various international forums. Local experts believe the GSP Plus is likely to be a game changer for the country's textile
industry, as it is expected to boost annual exports by US$1 billion.
Pakistan will enter the GSP plus club from January 1, 2014. GSP plus status enables it to export textile goods to 27 European countries till 2017 without any duties. It will allow almost 20% of Pakistani exports to enter the EU market at zero tariff and 70% at preferential rates.
Prime Minister Nawaz Sharif congratulated the nation for winning the GSP Plus status saying that gaining access to European markets was the top-most priority of the government as part of the economic development agenda. Sharif expressed hope that an increase in exports would facilitate economic growth and help in the generation of additional employment.
"The award of GSP Plus status shows confidence of the international markets on the excellent quality of Pakistani products," The Express Tribune reported Sharif as saying. "The textile industry [alone] would earn profits of more than 100 billion rupees [US$930 million] per year."
Last month, the International Trade Committee of the EU Parliament voted in Brussels to defeat a resolution that objected to the delegated act establishing the list of beneficiary countries GSP Plus. Pakistan was one of the 10 countries that the European Commission had proposed for GSP Plus in a single delegated act.
While Pakistani textile exporters welcomed the news, the country faces tough competition with Sri Lanka and Bangladesh, which already have duty-free access to European markets.
Pakistan's textile exports with a higher share of finished or value-added products are expected to benefit more from the GSP Plus status. The South Asian nation is the second-largest exporter of yarn, third-largest exporter of fabric and fourth-largest producer of cotton. Textile exports have an 8.5% share in gross domestic product (GDP), providing about 40% jobs in the manufacturing sector.
The country's textile exports in the first three months (July to September) of the current fiscal year through next June increased to $3.58 billion, up 9% year-on-year.
The textile industry contributes 50% of the country's total exports. Last year, Pakistan exported around $13 billion worth of textile products. Its textile exports may double in the next five years thanks in part to the GSP Plus decision.
The EU is Pakistan's largest trading partner after the United States. The EU imports around 25% of the country's products every year. Exports from Pakistan to EU are currently worth around 3.4 billion euros (US$4.6 billion) each year. The country mainly exports textiles and clothing products to the EU, accounting for over 60% of the total Pakistani exports to the EU, followed by leather products, which account for 13%. Even so, the country ranks only 52nd of the EU's trading partners despite being the world's sixth-largest nation.
Critics say the government needs to formulate a comprehensive policy to salvage the textile industry because exporters and manufacturers will not benefit from GSP Plus trade facility until and unless the government seriously addresses the problems confronting the industry.
The textile sector faces chronic energy shortages, high cost of production and uncompetitiveness in international markets. Almost 50% of the textile units in textile city of Faisalabad, in Punjab province, have been shut down due to cuts in gas and electricity supply. The status quo also raises questions over the country's ability and preparedness to meet the demand for textile products of EU countries and benefit fully from the GSP Plus status.
Last month, Minister of State for Commerce and Textile Industry Khurram Dastgir returned home from Europe where he lobbied personally European Parliament members in Strasbourg and visited the capitals of France, Spain, Italy and United Kingdom to present Pakistan's GSP Plus case.
"We have listened to Pakistan's plea for more trade and not just aid," The Express Tribune reported the EU's Ambassador to Pakistan, Lars-Gunnar Wigemark as saying. "While there is every reason to celebrate this milestone in EU-Pakistan relations, the GSP Plus regime calls for Pakistan to fully implement its commitments under 27 international conventions on human rights, good governance, labor and environmental standards."
The GSP Plus is granted to those countries that ratify and implement international conventions relating to human and labor rights, environment and good governance. The EU has been closely watching Pakistan's human rights record and also fiercely opposes the death penalty. Islamabad has repeatedly assured the EU that it would implement most of the international conventions required to qualify for the GSP Plus. The country has almost maintained its moratorium on capital punishment, which is a key EU demand before granting the GSP Plus facility.
Last year, the country broke a four-year moratorium on the death penalty, with the execution of former Pakistani army serviceman Muhammad Hussain, who was accused of murder. The execution drew EU condemnation, whose members were not willing to take the execution of the army soldier as an exception.
Hussain was tried and sentenced to death in a military court, and his petitions for mercy to the Chief of Army Staff were rejected. The EU criticized the Pakistani authorities for not utilizing all available options to exonerate Hussain and warned that the worst scenario for Pakistan-EU trade relations would be a series of executions.
Syed Fazl-e-Haider (http://www.syedfazlehaider.com) is a development analyst in Pakistan. He is the author of many books, including The Economic Development of Balochistan (2004). He can be contacted at email@example.com.
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