ISLAMABAD: A study on enhancing Pakistan’s trading benefits from the GSP+ scheme has suggested that Pakistan “must take advantage of the tariff preferences under the scheme, but this preferential duty regime will not suffice alone to secure sustainable market access to EU”.
They are merely a catalyst. Pakistan must take concerted action and adopt dedicated policies to address its comparative shortcomings vis-a-vis its direct competitors; the cost factor, production constraints, quality and delivery inefficiencies, lack of demand-driven export strategies, compliance with EU regulatory framework and private standards.
The study was commissioned by EU-funded Trade Related Technical Assistance (TRTA) programme being implemented by the UN Industrial Development Organisation (UNIDO), International Trade Centre and the World Intellectual Property Organisation (WIPO).
According to the study, Pakistan’s volume of exports to the EU does not reflect its potential. The gap arises from various domestic inconsistencies. As such, exports to the EU are supply-driven rather than demand-driven.
For obtaining maximum benefits from GSP+, Pakistan’s greatest strength is exports to the EU, its textiles and clothing sectors are also its biggest problem in benefiting from GSP+, says the report.
Textiles and clothing are the backbone of Pakistan’s exports to the EU, comprising 75 per cent of the value, but these have the least tariff relief under GSP+, as a consequence of which only 20 per cent of Pakistan’s GSP exports enter the EU duty free and will continue to do so unless new products lines are developed in textiles, clothing and leather made-ups and the quality of products in other sectors elevated to international standards.
A major conclusion of the study is that the key challenges to increasing Pakistan’s exports to the EU lie within the borders. Pakistan needs to analyse further why countries such as Turkey, Morocco, Tunisia, Vietnam and Bangladesh have greater market share in the EU, not to mention India and China, which have taken the competition to another level.
Despite the daunting task, the recipe is simple and well-known. What needs to be set right include high costs, low productivity, volatile prices of raw materials, difficulty in achieving the required market standards, costs of certification, lack of customer confidence, gaps in acceptable testing and conformance assessments, lack of compliance with traceability and global GAP standards, inconsistent levels of quality control and supply-driven exports that are unresponsive to demand.
The GSP+ preferences will certainly boost Pakistan’s competitiveness, but ultimate success in having greater access to the EU market will largely depend on Pakistan’s ability to meet EU consumers’ demand, both in terms of reliable export volumes and quality, to increase its production efficiency, to invest in technologies and skilled manpower, and to be able to deflect its competitors’ defensive or offensive actions. GSP+ alone will not suffice.
The margins of duty preference accorded under the GSP+ scheme can be a double-edged sword: they artificially increase the short-term competitiveness, but if not properly used to acquire long-term and sustainable efficiency, they bring complacence and downturn.
Pakistan is well-positioned to be awarded GSP+ status having already ratified 25 out the 27 conventions required under the scheme. However, its new constitutional distribution of powers between the federal and provincial governments requires optimal coordination to ensure that the rules and regulations enacted have uniformity of application and cohesion across the country.
The study also highlights that at present, while the federal government is authorised to negotiate foreign treaties and deal with matters such as those related to the reporting and monitoring of the 27 conventions, on-ground implementation is the preserve of the provincial governments.
Such dichotomy necessitates the creation at the federal level of a facilitation and supervision body that can coordinate with the provincial governments in such matters.—A.A.