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View from Brussels

November 21, 2013

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THE government and textile magnates are visibly happy that from next year Pakistan is likely to start earning extra revenue from its exports to the European Union. They will do themselves considerable good by paying due attention to the EU’s perspective on the subject.

The reason to hail the prospects of securing GSP Plus (Generalised System of Preferences-Plus) status from the EU is understandable. Pakistan’s trade deficit has been growing year after year and is now said to be in the region of $21 billion.

The pressure on our reserves and the currency itself will progressively become unbearable. The only way to stay afloat is not only to maximise exports from the current production range but also to increase the variety of exportable goods.

Since increasing the volume of trade with traditional partners is considered less difficult than breaking into new markets, the idea of enlarging the volume of exports to the EU, Pakistan’s largest trading partner, comes easily to the mind of both our bureaucrats and businessmen.

It has been suggested that the GSP Plus status should enable Pakistan to raise its exports (textiles) from $6bn a year by $1bn — an increase of more than 16pc.

Several quarters are wondering whether Pakistan can derive the fullest possible benefit from the GSP Plus facility. The industrialists have complained of production bottlenecks (mainly energy shortfalls) but the questions of quality and pricing of goods are perhaps more important at present than infrastructural requirements.

Even more crucial is the need to deal with constraints caused by the extremely narrow base (textiles mainly) of our exports. According to a friend who has had long experience in international commerce, Pakistan will be able to achieve an economic breakthrough only by ending its near total dependence on textile exports.

While the diversification of exports, especially through expansion of the manufacturing sector (other than textiles), should be one of the permanent concerns of our policymakers, some thought should also be given to building Pakistan’s capacity to retain the confidence of its European partners.

To begin with, the GSP Plus status is yet to be granted to Pakistan. All that has happened so far is that Islamabad has created a favourable impression on the European Commission and the relevant committee of the European Parliament has voted in favour of Pakistan (among many other countries). This has given rise to the hope that the European Parliament will follow suit sometime next month.

Islamabad should not forget that getting a favourable vote in the EU parliamentary committee was not easy (17-12-1) and that the outcome in Pakistan’s favour was not absolutely certain till the time of voting.

Participation in a discussion on whether the grant of the GSP Plus status and trade expansion will have a favourable impact on the life of the minorities held at the time the committee concerned was debating the matter, enabled the writer to get an idea of the kind of reservations the Brussels lobbies have about Pakistan’s eligibility for concessional treatment. Nobody needs to cavil at the European states’ interest in the rights and well-being of members of minority communities. Their desire to see that minorities get their due share in the country’s increased prosperity can easily be understood as a plea for respecting the principle of guaranteeing the fruits of economic development to all sectors of society, especially the most vulnerable, such as women and minorities.

Regardless of the wishes of the trading partners no responsible authority anywhere should have any qualms about upholding this principle.

One also heard the common Pakistani complaint that the EU’s reported emphasis on the abolition of the death penalty amounted to an unwarranted interference in Pakistan’s affairs as this country had a “sovereign right to treat its criminals according to its laws”.

Apart from the Pakistani people’s habit of trying to escape from their obligations under the cover of a concept of sovereignty that is becoming increasingly irrelevant, such questions arise in citizens’ minds because they have not been taken into confidence about the conditionalities Pakistan has been accepting over the past six decades while signing defence pacts and economic relief agreements with the International Monetary Fund/World Bank.

In any case, Pakistani spokesmen have found a way of explaining the extension of the moratorium on the execution of the death sentence, and so long as at least this position is maintained the world will not bother itself too much about Islamabad’s motives and excuses.

Far more worrying, is the European community’s lack of faith in Islamabad’s capacity to respect and implement the 27 conventions (human rights treaties and ILO conventions) without which the GSP Plus facility cannot be extended.

Nobody is prepared to overlook forever Pakistan’s record of ratifying international treaties and ignoring the requisites of their implementation. Greater proof is sought for sustaining the belief that the democratic order will survive, gain in strength and become immune to coups. This despite the fact that Pakistan’s representatives who have been interacting with the European Commission are respected for their ability to conduct fruitful discussions. Obviously, the world has not forgotten Pakistan’s proneness to default by political leaderships.

The most strident criticism of Pakistan one hears in Brussels pertains to the freedom from taxation the elite enjoys. The popular refrain is that rich farmers are not taxed, and industrialists, including the politically powerful, are rated successful in terms of their skills in evading taxes.

Pakistan’s case for cooperation will get a better response from the world if the country displays the will and the means to generate more resources and spend less — a piece of advice it has been receiving throughout its history. The consequences of ignoring this counsel any longer will be extremely grave.