ISLAMABAD: The WTO's Council for Trade in Goods on Wednesday approved a European Union (EU) waiver on customs duties for 75 items, mostly textile related, from Pakistan to help the country recover from 2010's floods.The EU offered this one-time facility to Pakistan and approached WTO in October 2010 to seek a waiver on trade preferences to Islamabad on these products amounting to almost 900 million euros in import value, or 27 per cent of imports from Pakistan for a two-year period from January 2012 to December 2013.
The EU package materialised following humanitarian appeals from the United Nations. The UN estimates the floods affected some 20 million people and 20 per cent of Pakistan's land area, about 160,000 square km, with 12 million people need urgent assistance.
However countries like India, Brazil, and Bangladesh and textile lobbies within the EU had blocked the implementation of the preferential package originally scheduled to be effective from January 2011.
To get the package approved through WTO, a well-placed source in the commerce ministry told Dawn that a revised document after consulting all the member countries was submitted to the WTO secretariat on January 20, 2012.
As a result, all opposing countries dropped their objections following the amendments made by the EU in the original documents by introducing tariff rate quotas (TRQs) on 20 products rather than full liberalisation.
In the original document, submitted in 2010, the EU proposed only eight items for TRQs. However, Secretary Commerce Zafar Mahmood said the tariff quotas will be set at 20 per cent above the average of Pakistan exports in 2008, 2009 and 2010.
"This will provide us sufficient margin in the range of 20 to 25 per cent over our 2011 exports", he said, adding the TRQ level was quite satisfactory. He explained there would be no customs duty on imports under TRQ. However, if the prescribed threshold limit will be crossed then it will attract normal tariff lines on most-favoured nation status.
The package will go through the WTO's General Council for formal approval later this month.
"We also expect this decision will culminate into granting of generalised system of preferences (GSP) plus scheme to Pakistan to be effective from 2014", the official added. The GSP plus scheme offers duty-free imports.
The EU estimates the preferences would increase Pakistan's exports by 100 million euros. At the same time, the EU was planning to drop high tariff on ethanol from Pakistan subject to an annual quota of 100,000 tons.
In the revised package, an official in the commerce ministry said that a 20 per cent rise in Pakistani exports of certain fabrics, towels, women's jeans and socks will lead to the loss of the preferential tariff.
The official source also indicated reduction of quota for duty-free ethanol to 80,000 tons from 100,000 tons. And the bedlinen, one of Pakistan's main export products to EU, was also dropped from the scheme.
Meanwhile, the EU ensured WTO members that their interests would not be harmed.
"The EU said that it had noted the concerns. They (WTO members) had given it due to unique circumstances and no precedent will be set", the official said.
Under the revised EU offer, the $1 billion home-textile exports to EU were excluded from concession from Pakistan while allowing mostly duty-free imports of textile raw materials.
While commenting on the package, Federal Adviser on the Textile Industry Dr Mirza Ikhtiar Baig said that around 65 products were related to textile sector. The bill would now go to EU Councils of Ministers to be passed into law which may take about a month to implement.
He estimated that the concessions will result in additional exports of 400 million euros per annum and will provide a level playing field with Bangladesh which also enjoys GSP Plus duty free status from EU.
Foreign Office Spokesperson Abdul Basit said Pakistan was thankful to all WTO member countries for their support. "The government of Pakistan particularly appreciates the European Union and its member states for their commitment to help Pakistan revive and stabilise its economy through trade".