Eligibility for sustainable GSP Plus facility

Updated October 28, 2013

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- File Photo

While EU’s GSP Plus status for Pakistan seems almost a certainty, it remains to be seen whether the country would be able to benefit from this status.

Even without the granting of the Generalised Scheme of Preferences (GSP) Plus status, the European Union is still one of Pakistan’s largest trading partners, and about 30 per cent of its exports are destined for EU countries.

However, our exports to the EU are below potential. With improved access to European countries through the GSP Plus status, opportunities for Pakistani exporters to expand into EU markets would increase manifold. In fact, about 66 per cent of all tariff lines of the EU would have zero custom duty for our exports.

Countries that are eligible for this status are those who are considered vulnerable in their trade profile with the EU. This vulnerability is reflected in a lack of diversification of exports: i.e. 75 per cent of the export share is dominated by seven or lesser items, and exports constitute less than two per cent of EU’s total GSP imports (in case of Pakistan, it is only 0.2 per cent).

While 39 countries meet this criteria, this status has so far been granted to only seven countries, as tariff preferences are conditional on an unqualified commitment for ratification and implementation of 27 international conventions — 16 of which relate to human rights and labour rights, while the remaining relate to governance and development issues.

It is estimated that after achieving the GSP Plus status, 20 per cent of Pakistan’s exports would be able to enter duty-free in the EU, while 70 per cent would be treated at preferential rates.

However, there are many ifs and buts in the EU’s rules for GSP Plus status recipients, which are mainly aimed at protecting the local industry. They include the suspension of the status on items if the import of any item increases by 17.5 per cent over three years, as well as various safeguard clauses etc.

But the scheme still offers many advantages to Pakistani exporters, particularly in leather products, knitted and woven apparel, and other miscellaneous items. It is hoped that if exporters play their cards well, the country would be able to enhance its exports to the tune of $800 million, which would make a huge dent on our adverse balance of trade.

However, the weakest link in the chain is the enforcement and implementation mechanism of the 27 conventions, which the government has already ratified or is in the process of ratifying.

There seems to be no strategy in place regarding how the government would go about implementing these conventions, when its writ is so eroded that it cannot even enforce simple traffic rules. The conventions, which the EU wants us to implement, can be categorised into three groups.

• Conventions on human rights, with a special emphasis on rights of women and children

• Conventions that relate to the environment

• Conventions that relate to governance

On the human rights front, Pakistan signed the convention against torture and other cruel, inhuman or degrading treatment of punishment (CAT) on April 17, 2008, but the ground reality remains unchanged. During the last one year, more than 1,300 cases of torture were reported from the country. The Pakistan Army is reportedly running 52 detention centres. The government needs to work overnight to improve its human rights record.

Similarly, much needs to be done in other fields like labour rights, environment, minority rights and governance. In most of these areas, the legal framework is to be created by aligning national laws with these conventions. The capacities of enforcement officials need to be built, and implementation strategies are to be formulated.

Several steps can be initiated. Firstly, a joint public-private committee comprising senior government officials and businessmen needs to be formed, which may be tasked to prepare a report on the status of implementation of these conventions and give recommendations on the mechanism for their effective implementation.

Then an inter-ministerial committee may be formed to periodically assess the status of implementation of these conventions. After the promulgation of the 18th amendment, many of these matters now rest with the provinces, so they should also be taken on board, and their representation needs to be ensured in the committee.

It would be also worthwhile if representatives of reputed NGOs, like Amnesty International, Human Rights Watch etc. are also given representation on this committee.

We need to study the monitoring mechanism of the EU as well, which is clearly spelled out on their website. We also need to have a panel of competent lawyers who are well conversant with international law and who can defend Pakistan if the relevant agencies find the country in breach of these conventions.

It needs to be borne in mind that the EU has very strict monitoring mechanisms and that the GSP Plus status can be withdrawn on the recommendation of these monitors.

The most revealing case in this regard was of Sri Lanka, which was divested of its GSP Plus status in 2010 due to its alleged violations of the human right conventions when its government was waging its decisive phase of war against Tamil separatists. This adversely affected the country’s readymade garment industry, as many of the units closed down.

Meanwhile, the Trade Development Authority of Pakistan (TDAP) and the private sector should undertake a joint study to identify the products — besides traditional clothing — that can be exported to the EU market.

The government and the exporters should aggressively work on removing supply side constraints like power and gas shortages etc. to increase the share of value added textile products like readymade garments, among others, where Pakistan enjoys a definite competitive advantage.

The EU market is more quality conscious and there is no reason that once Pakistani exports make inroads there they would not like to stay there for a long period.

There is also a lot of potential to enhance non-traditional exports. For example, agricultural products only constitute 8.2 per cent of our exports, and there is no reason we cannot increase this share if we make special efforts in complying with European python-sanitary standards. But unfortunately, exports of this sector have not been able to make much headway.

Meanwhile, our seafood exports are practically banned due to poor hygienic conditions.

The government, in its export vision 2015, has committed to undertake certain initiatives in this sector, but none of them has materialised yet. And despite having the best quality fruits, including mangoes, we have been unable to export our delicacies to lucrative markets like the EU.

There is an urgent need for our traders to undertake practical measures to improve processing and packing standards of food items and make them at par with the EU’s standards. Similarly, we can increase our share in the automotive sector by enhancing the quality of our auto parts.