KARACHI, Nov 25: The government has in principle agreed to resolve the quota problem arising out of US embargo by allowing the exporters to swap their required quotas with other fast running categories or compensate them through refund at last quota auction price.

This was resolved in a meeting called by the Minister for Commerce Humayoun Akhtar Khan in Islamabad on Wednesday, which was attended by a large number of exporters' representatives.

In order to allow exporters to meet their export commitments during the last quota year ending on December 31, 2004, the minister also agreed to give freight subsidy to those consignments shipped on January 1, 2005 and ask the Export Promotion Bureau (EPB) to swap quotas with other categories.

The commerce minister convened the meeting with value-added textile sector to discuss issues and problems to be confronted by them in the post-quota era starting from January 1, 2005. During the course of the meeting some exporters raised the US embargo issue, which took the attention of the minister.

According to participants of the meeting, which lasted for over six hours and much of the time was consumed on resolving and finding out a solution to the US embargo recently imposed on major categories like 360(pillows), 361(bed sheets), 666S(bed sheets made of man made fibre), 666P(pillows cotton), 338(knittwear) and 347(garments).

As the issue was so important and there was a clash of interest amongst exporters, Humayoun Akhtar Khan felt it appropriate to invite the Textile Minister Mushtaq Cheema to the meeting. But to utter dismay of exporters, the textile minister declined to come, participants said.

Since there was diverse interest in the quotas and some of the participants belonged to quota barons and quota brokers, the Commerce Minister found it difficult to sort out the issue. However, after a thorough deliberations and brain storming it was resolved to allow exporters to swap their quotas with other fast running categories.

There was a general feeling amongst exporters that the newly appointed Textile Minister was not giving sufficient time to their issues, and so far he did not even meet the Karachi-based exporters.

With quota-free era only a month away the newly-appointed minister should interact with exporters and try to find out way to resolve their issues to keep them competitive in the world market, the exporters said.

The over-shipment resulting in embargo from US customs is the legacy of the past years because it had been the practice to adjust the over-shipments against next year's quota through carry-forward facility, but since it is last year for the quotas, therefore, no adjustment could be made against next year quotas.

Consequently, exporters are faced with a situation where they are unable to fulfil their export commitments but their buyers are insisting upon them to do shipments to meet their contractual obligations.

With regard to issues related to post-quota era the minister took note of the points raised by exporters' representatives. The most damaging factor for country's textiles and clothing exports in quota-free market is the withdrawal of Generalized System of Preference (GSP) by the European Union (EU). Under the GSP the EU has withdrawn 12 per cent customs duty on Pakistani imports.

It was discussed as to how to off-set the negative impact of the GSP withdrawal by giving some relief, which should not be in violation of WTO and other international conventions. Exporters strongly feel that they would not be able to compete with such a big margin and demand that measures be taken to reduce their cost of production.

It was also agreed that exporters of textiles and clothing should get some relief by getting some subsidy or through raise of duty drawback rates or any other method, which should be within the legal framework.

There was strong feeling amongst exporters that most of the suggestions given by them and accepted by the Ministry of Commerce do not see the light of the day as the Ministry of Finance rejects them and do not release required funds to meet the situation.