LUXEMBOURG, Oct 16: The European Commission on Tuesday promised Pakistan textile trade concessions worth over one billion dollars in what officials said was an unprecedented European Union effort to boost the country’s economy.

Proposals made by European Trade Commissioner Pascal Lamy after hectic negotiations with Islamabad including discussions with Pakistani Trade Minister Abdul Razzak Dawood in Singapore over the weekend, call for the elimination of all EU tariffs on Pakistan’s exports of clothing to the EU.

Lamy has also asked EU governments to agree to a 15 per cent increase in Pakistan’s textile export quotas to Europe.

Pakistan in turn had agreed to reduce its own tariffs on European textiles, Lamy told a news conference.

“The proposed package will give Pakistan the best possible access to the EU short of a free trade agreement,” Lamy said.

The EU measures had been specifically tailored to target clothing and textiles which accounted for three-quarters of Pakistan’s exports to the EU, the EU trade chief added.

Lamy’s proposals are a vital part of a new EU drive to improve relations with Pakistan, now seen as vital ally in international efforts to clamp down on terrorism.

“I hope these improved concessions for Pakistan will reinforce the EU’s political and economic relations with Pakistan and help the country in difficult circumstances,” Lamy stressed.

Other EU initiatives expected in the coming weeks include a planned signature of an EU-Pakistan trade agreement which was put on ice after the 1999 military take-over.

Also in the EU pipeline is a first-ever package of direct budgetary assistance for Pakistan.

The EU was focusing on Pakistan because it is in “an exceptional situation,” said Lamy, adding: “Trade is a weapon of peace.”

The main elements of the EU package are:

- Removal and reduction of tariffs: The commission is suggesting that all tariffs imposed on exports of Pakistani clothing should be eliminated as of January next year.

The measure, made under the EU’s generalised system of preferences (GSP) scheme, would include Pakistan in the special EU regime for countries engaged in combating drugs.

“Pakistan has pursued a vigorous campaign to eradicate the production and transit of drugs in its territory,” the commission said.

Further efforts were needed “given the difficulties Pakistan will face while a massive influx of refugees arrives from Afghanistan.”

The commission said the removal of tariffs would benefit the Pakistani clothing sector, which accounts for around 60 per cent of exports to the EU, by eliminating the existing preferential 7 per cent duty rate as of January 1, 2002.

Translated into economic terms this concession would eliminate 150 million euros worth of duties a year with the resultant increase in the competitiveness of Pakistani exports in the EU market.

Pakistani exports in all fields would see their level of preferential duty reductions doubled from the proposed 3.5 per cent to 7 per cent across the board.

- Quota increases: Secondly, in line with a memorandum of understanding initialled on Monday night by the commission and Pakistani negotiators, the EU is proposing a boost in the EU quota for imports of Pakistani textiles and clothing by 15 per cent on a one-off, across-the-board basis.

This concession is expected to be worth a potential 1 billion euros to Pakistan over the four-year period to 2004.

As part of the agreement, Pakistan would in turn reduce its duties in the textiles and clothing sector to rates of 5 per cent, 15 per cent and 25 per cent from 2002 (a 5 per cent reduction across the board compared with 2001), and bind these rates to a maximum amount for the future in the World Trade Organisation not later than July 1, 2002.

Pakistan exported goods worth some 2.3 billion euros to the EU in 2000. Cotton, textiles, garments and leather goods accounted for 75 per cent of this total.

Pakistan is the EU’s 13th largest supplier of textiles and clothing. Pakistani exports to the EU in 2000 were worth 1.7 bn euros.