ISLAMABAD, July 27: Pakistan is eying greater market access for textile and clothing exports under the proposed modalities of the Non-agriculture Market Access (NAMA), besides providing shelter to the sensitive local industries against the cheap imports, a trade diplomat said on Friday.

It is expected that the proposed modalities would have major beneficial impact on exports, in particular for textiles and clothing. Pakistan’s export are concentrated in textile and clothing and in two markets US and EU. In US a duty ranging from 8 to 32 per cent is levied whereas in EU the rate of duty is 4 to 12 per cent.

As a result of the proposed reduction in tariffs, in case of EU Pakistani exporters would be paying less than half the current levels or in the range of 3 per cent to 5 per cent or less. In case of the US, reductions would be of much greater magnitude as current tariff levels on clothing are rather high. All tariff levels would be reduced to less than 7 per cent.

According to Pakistan’s reaction on the draft NAMA modalities, which said the centre-piece of the NAMA paper was that a Swiss formula for cutting industrial tariffs be adopted with coefficients of 8 or 9 for developed countries and a number somewhere in the range of 19 to 23 for developing countries.

Developing countries can use 10 per cent tariff lines (up to 10 per cent of NAMA trade in value terms) for less than formula reduction or 5 per cent tariff lines (with 5 per cent value limit) for keeping tariff lines unbound or out of formula cut.

Pakistan, like many other countries, has two key objectives from these negotiations. These are to seek reduction of tariffs on items of its export markets and to have the flexibility to provide adequate protection for its sensitive industries. Pakistan’s current applied tariff is 15 per cent as against its bound tariff of 55 per cent.

More than 99 per cent of Pakistan’s NAMA tariff is bound (majority of lines have a gap of 50 percentage points between applied and bound tariffs). The maximum slab of applied tariff is 25 per cent except for about 250 tariff lines related to auto and allied industry.

Pakistan’s Counsellor to WTO Dr. Mohammad Saeed said the tariff differential was negatively impacting the biggest sector of Pakistani exports. There are around 5,400 tariff lines in NAMA.

”If we opt for 10 per cent flexibilities, we would have around 540 lines to cover our sensitive sectors. The preliminary consultations and calculations have shown that we can cover most of our sensitive sectors in these lines,” he said.

Citing an example of car industry, he said, the applied tariff of 100, 120, 150, and 250 in 2001 would need to be bound at 70, 85,120 and 145, respectively, whereas our current applied rates range from 50 to 75. That is also true for most other sensitive sectors.

Second category would be those lines, which are currently at 25 per cent. Almost all such lines are bound at 75 per cent. A representative example would be of home appliances like air conditioners. These would be bound at 15.1 or 17.6 per cent (depending upon the coefficient of 19 or 23).

This means per year reduction of around 6.5 per cent. For first seven years, Pakistan would not be required to reduce any applied tariffs. It would only be reduced in eighth year (around 3.5 per cent) and ninth year (around 6.5 per cent).

Mr Saeed said third category would be those lines, which are bound at the same level as our applied rates are. These are the lines relating only to textile and clothing, which were bound at applied rates to get additional market access from EU in 2001.

The tariff lines bound at 25 per cent would need to be reduced to 10.8 to 12 per cent (using coefficient of 19 and 23, respectively). This would mean a reduction of either less than 1 per cent or max 1.5 per cent per year. Being competitive enough in this sector this is less likely to be of any concern.

The chair of the draft modalities has proposed longer timeframe of seven equal reductions instead of five on some tariff lines to compensate countries, which may be affected because of long-standing preferences. The proposed solution would delay the liberalisation to the extent of 16 tariff lines in US and 23 tariff lines in EU by two years. These include certain tariff lines relating to clothing both in US and EU of export interest to Pakistan.