June 27, 2008	Friday	Jamadi-us-Sani 22, 1429

ISLAMABAD, June 26: Pakistan has joined the G-12, comprising the US, EU, Japan, China, Australia, Canada, Brazil, India, Mexico, and South Africa, in a bid to seek maximum market access for industrial goods, particularly textile and clothing, under the current Doha Development Round.

Pakistan’s inclusion in the group is very significant,” said a senior official in the Commerce Ministry on Thursday, adding after making a progress in the negotiations on non-agriculture market access by the group, World Trade Organisation director-general has announced the holding of seventh ministerial meeting on July 21 in Geneva.

The official said while substantial progress has been made on several issues, many issues are yet to be settled.

“Without having a clear understanding on those issues, it is not clear if the ministerial meeting is going to succeed,” he added.

A final deadline of end July 2008 has been established for completion of modalities -- the way tariff cuts and other decisions are to be applied -- on agriculture and industrial goods, the official added.

According to the official, Pakistan’s key interest in the Doha Round is to get tariffs on its exports to the US and EU reduced substantially.

If talks are successful, tariff rates which could be as high as 32 per cent on many clothing items in the US market could come down to less than five per cent, he said and adding, it would also reduce disadvantages to Pakistan as compared to its competitors, many of whom enjoy duty-free access to the US market.

Analysts said despite being a partner on war on terror and also having been a close ally of the US, Pakistan was never allowed any trade concessions in the US market.

The EU had allowed duty-free access in the wake of Afghan war but those concessions were withdrawn at the end of 2004. This created serious difficulties for Pakistani exporters and its textiles and clothing industry.

Compared to Pakistan, many other countries which never supported any US or EU policies are enjoying duty-free access, they said. The official said to overcome these difficulties, exporters were allowed six per cent Research and Development subsidy. However, as in the past, such subsidy resulted in further lowering of prices of Pakistan’s products and the government had to pay over Rs30 billion.

He said much of these government funds were passed on by exporters to EU governments as anti-dumping duty on Pakistan’s exports. The All Pakistan Textile Mills Association (Aptma) has been seeking a fresh package of over Rs50 billion.

Considering that they get loans on preferential rates, their subsidies are much higher than any other industry.

Currently the US and EU collect maximum duties on Pakistani exports. On average, they are more than 10 per cent whereas their (EU and US) average tariff rates are less than three per cent.

The official said while the new political government finds itself in difficulty because it has no fiscal space to pay subsidies, at the same time subsidies for one sector discourage development and export of other products. As a result, he said almost two-thirds of Pakistan’s exports consist of low quality textiles and clothing.

Since Pakistan has failed to diversify, it has to face worsening trade deficit. Recent budgetary measures to curb imports are likely to further adversely affect Pakistan’s exports, he added.

Analysts said if the Doha Round is successful, it is time for Pakistan to rethink its trade policy. It needs to move on to encourage export of other dynamic products and make use of opening of new markets.