ISLAMABAD, June 23: Pakistan’s export of all products to European Union member countries will attract a 12 per cent duty from July 1 following the graduation of all products under the drug related generalized system of preferences (GSP) scheme.

Officials told Dawn on Thursday that the EU had earlier committed to the WTO to replacing the existing drug related GSP scheme with the new GSP scheme to be effective from July 1, 2005. However, the new GSP scheme was now expected to be implemented from January 1, 2006.

Under the new GSP scheme, Pakistan will get a reduction in duty of around 3.5 per cent on export of all products except for textile and clothing to EU member countries. For the clothing sector, the duty reduction will be in the range of 2.5 per cent and for yarn and fabrics, the duty cut will be in the range of 1.2 to 1.4 per cent.

The officials said the implementation of the new GSP scheme was delayed because of differences between EU member countries over the fixing of graduation limit for textile and clothing producing countries under the scheme.

In a draft released by the European Commission in October last year, the graduation limit for textile and clothing for the new GSP scheme was fixed at around 10 per cent.

Since Indian share of textile and clothing in the existing scheme is around 12 per cent it could not get preferences in duty on textile and clothing under the new scheme. Some of the EU member countries wanted to raise the limit to 12.5 per cent so that Indian could be included in the new scheme. Other textile and clothing countries of EU opposed the move.

The question is whether the violation of WTO ruling on the drug related GSP scheme will be challenged by the Indian government or any member country or it will seek any compensation.

An official announcement issued on Thursday said that EC Director General Trade Peter Carl in a meeting held recently in Brussels with Pakistan’s Secretary Commerce Tasneem Noorani expressed the hope that the new GSP scheme would be adopted shortly and implemented from January 1, 2006.

The commission is likely to succeed in obtaining an approval from the Council of Ministers on a compromise solution to the ongoing stalemate over the adoption of new GSP scheme.

The meeting discussed the new GSP scheme, ongoing investigation process relating to the export of bedlinen from Pakistan to the European Union, export of ethyl alcohol and other trade matters.

Sharing his concerns about the adverse effects on bedlinen exports from Pakistan due to any further delay, the commerce secretary referred to the inevitable trade diversion currently taking place. Both the sides reiterated the desire to further strengthen and promote trade relations between Pakistan and the European Union.