Pakistan has been given zero-rated preferential market access to the European Union under GSP Plus from the first of this month for 10 years, with a periodic review every two years.

Before the GSP Plus, Pakistan was awarded zero-rated market access on 75 items under the Autonomous Trade Preference (ATP) from mid-November 2012 till December 31, 2013.

Amongst these 75 items, 26 were subjected to zero-rated ‘tariff rate quotas’ (TRQ). And beyond the specific import quantity and the quantitative limit, usual tariff was to be paid. These items were the most critical, as their export to EU markets was relatively more substantial than other products.

According to data released by the European Union till September 2013, one can analyse as to what extent did Pakistan benefit from the ATP. On that basis, one may be able to forecast the country’s future export pattern to the EU under the current GSP Plus.

The data shows that Pakistan’s exports of the 75 items surged during the review period over the corresponding period of the previous year.

In terms of value, exports increased from one billion to 1.27 billion euros, while in terms of quantity, exports rose from 184,000 tonnes to 289,000 tonnes. While export value was up 27pc, quantity jumped up by 57 per cent.

The rise in the quantity of exports was more than double the increase in the value of exports. To diagnose reasons for this, we have to analyse sector-wise export of items under the ATP.

Fabrics: The sector-wise break-up shows that fabrics emerged as the top export item. Its export value during the 11 months was 366 million euros, up 32pc from corresponding pre-ATP period. It is interesting to note that fabrics, which were imported into the EU under zero-rated TRQs, recorded a negative growth of 12pc, while items given quota-free, zero-rated market access, surged 38pc.

Readymade garments secured the second position under the ATP programme. Ladies’ denim jeans was the top export item at 151 million euros, against 102 million euros in the pre-ATP period, and constituted 67pc of the total export value of readymade garment products. Exporters utilised the full available zero-rated quota for this product.

The overall export of readymade garments grew by 43pc. There were only two readymade garment products that were subjected to TRQ — ladies’ denim trousers and ladies’ suits. The second one, till December 31, had utilised only 21pc of its allocated quota. More interestingly, the quantity of export of this product was four per cent higher than that during the pre-ATP period.

Knitwear climbed 28pc and ranked as the third top exporting product group. Its exports amounted to 221 million euros, up 28pc from the pre-ATP period. The performance of products subjected to TRQs surged 41pc, while quota-free products grew only 11pc. Socks emerged as the top export item in this category, and were the third top exporting product among all 75 products under the ATP.

Pakistani exporters utilised the full duty-free quota for socks two-and-a-half months prior to the end of the year. The export value and quantity of socks were up 60pc and 69pc respectively. The value of socks rose from 47 million euros to 75 million euros in the post-ATP period.

Made-ups emerged as the fourth top exporting product; however its export growth was not significant, showing a mere rise of 3pc. Towel was the top export product, whose value in the ATP period was 130 million euros, and contributed 61pc to the total export of made-ups.

Overall, towel was the second top product among all 75 ATP products. Its export growth, in terms of value, was 12pc, although 28pc of its duty-free quota remained unutilised.

Leather products, including leather footwear, were subjected to TRQs. Their export value rose by 5pc only, with more than 50pc of their duty-free quota unutilised. Only two products — a specific quality of finished leather, and a footwear product — were exported with full quota utilisation.

Export of leather gloves rose by an insignificant amount, while its duty-free quota utilisation stood at 36pc.

Protective leather gloves were the fourth top export item among all 75 products, and their export value was 57 million euros. Only 50pc of their duty-free quota was utilised. Comparatively, export of footwear showed a better performance, as both its export value and quantity grew by 22 pc.

Mushroom exports showed a negative growth, while yarn recorded a significant growth of 30pc. Ethanol performed well, as its export value and quantity surged 309pc and 469pc respectively. Its duty-free quota was utilised one-and-a-half months prior to the end of the year.

The top six products recorded exports above 50 million euros. The top five products — ladies jeans/ trousers, towels, socks, leather gloves and ethanol — were subject to TRQs. Only one product — plain weave cotton fabric — was allowed under the duty-free quota. These top six products contributed 40pc to total exports, and grew at a rate of 45pc.

However, zero-rated quotas of 19 items were not fully utilised. On average, 41pc of the available quota remained unutilised. A rough estimate shows this non-utilisation caused a loss of approximately 144 million euros in export earnings.

Lower earnings may have two causes; first may be a price war amongst exporters, the other a sharp reduction in world cotton prices.

However, the shortfall in quota utilisation and even negative growth of some products cannot imply a failure of the ATP scheme. Quantity of exports increased by 57pc which is a vcery significant rise. However, export earnings comparatively do not reflect a good picture. Value increase of 37pc is much lower than the quantity surge in exports.

The writer is an economist at the Research Analysis Division, Trade Development Authority of Pakistan