Celebrating three years of bilateral progress and trade under the European Generalised System of Preferences plus scheme, Pakistan is optimistic about sailing smoothly through the review process of the preferential scheme early next month.
The pre-review signals emanating from top EU capitals favour the continuation of the scheme as an award for Islamabad’s progress in promoting good governance and sustainable development.
Brussels will review the progress on implementation of 27 UN conventions pertaining to human rights, labour rights, climate change, narcotics control and corruption. The review is part of the scheme which only monitors progress in terms of the convention and then submits a country report to the EU parliament.
Pakistan’s first review under the GSP plus was conducted in 2016 when the country massively used the tool of capital punishment in spite of strong resistance from some European capitals. Ahead of the scheduled second review, Pakistan has made tangible progress in terms of legislation and its implementation.
At the technical level, Pakistan has already held several rounds of meetings with Brussel-based EU officials, Pakistan based EU country ambassadors and some top officials in important EU capitals. Recently, two-members of the European parliament also visited Islamabad to get sense of the scheme and progress on the implementation of the conventions.
“We are very hopefully that the review will be successful”, a senior official of the commerce ministry told this scribe, adding Pakistan has already covered the basis for review and will do some more in the current month.
The early responses from these meetings also suggest that the second review will sail through smoothly owing to progress achieved so far when compared with the period when the first review was conducted in 2016.
Analysts believe that the Europeans have a tradition of reviewing performance in terms of a persistent upward growth trajectory instead of milestones. They say there are enough grounds to make a strong case for the successful review.
The pre-review signals emanating from top EU capitals favour the continuation of the scheme as an award for Islamabad’s progress in promoting good governance and sustainable development
Moreover, data shows that imports from EU countries surged to 5.3 billion euro in calendar year 2016 from mere 3.84bn euro in 2013, reflecting a hefty growth of 38pc over a period of three years.
In December 2013, the EU parliament enacted the legislation that put in place its GSP scheme for the period of 2014-2023. Pakistan was included as one of the beneficiaries of GSP plus trade concessions amongst 13 other countries. The scheme was implemented from January 1, 2014.
For Brussels the review revolves around the parameters to assess progress achieved since 2014 in the areas of climate change, reduction in corruption level, labour rights, human rights etc. In Pakistan the only yardstick to measure the scheme’s success is the overall increase in export volume or sectoral shares. A few markers can be used to assess Pakistan’s performance.
Over the past three years, exports have not only been restricted to few commodities but are still concentrated in particular markets. Almost 75 per cent of total exports consist of seven over arching products.
Overall textile products exports surged to 4.87bn euro in 2016 from 3.14bn Euro in 2013, which represent an increase of 54.8pc. Of these exports of textile apparel & hosiery have grown from 1.4bn euro to 2.47bn 25ros in 2016, indicating an increase of 76.4pc.
The second biggest share went to home textiles—bed, kitchen, and toilet wear—which surged to 1.56bn euros from 980m euros, representing an almost growth of 60pc. The export of cotton, fabric and yarn also increased from 739m euros to 805m euros, an increase of nine percent.
Exports of carpets and rugs to the EU increased to 37.92m euros from 30.3m euros. It clearly shows that the value-added sectors posted a tremendous growth during the past three years.
In terms of percentage increase, Pakistan’s exports to 10 countries witnessed more than 50pc growth over the three years of the GSP plus scheme. These are Luxenberg, Slovenia, Spain, Poland, Cyprus, Czech Republic, Denmark, Slovakia, Austria and Hungry.
The exports to countries of the Eastern bloc were considered to be one of the impacts of the scheme.
But trade analysts have an alternate take on this growth under GSP plus scheme. Cheaper imports because of duty waiver and competitive unit price are two main factors that caused exports to these countries to pick up.
It is stated that increase in export growth to EU was because of diversion of trade to avail zero duty export facility and double-digit depreciation of Euro against all major currencies. It is also not clear from the fact that no visible investments were made in the textile and sectors to enhance the production line.
Published in Dawn, The Business and Finance Weekly, January 8th,2018