BRUSSELS, March 18: The European Union’s decision to reject Pakistan’s demands for access to the bloc’s special duty-free trade preference scheme known as GSP Plus is a disappointment for Islamabad, which lobbied long and hard to become eligible for such benefits. It is of course also a serious financial blow to Pakistani textile exporters who, in addition to losing access to GSP Plus, also face an EU anti-dumping duty on bed linen exports to Europe and are currently facing fierce competition from China and India on the European market. Significantly, however, the move is also a reflection of the current disarray in Europe’s textile sector following the elimination of worldwide import quotas on January 1 and the industry’s obvious failure to undertake internal restructuring and modernization in preparation for free global trade in textiles. Europe’s textile industry and governments, however, are not just worried about Pakistan’s exports. EU governments are also battling over whether or not to “graduate” Indian textiles out of the generalized system of preferences. And as in the United States, calls for safeguards against Chinese textile and clothing exports are pouring in from European industry and governments. Clearly, the furore is strong proof of the abiding power and influence of Europe’s traditionally protectionist textile industry - and evidence of the increase in the number of EU governments fighting to keep a lid on textile imports since the bloc expanded to 25 countries last May.

Opposition to any move to open up EU textile imports - even slightly -always led to screams of agony from Portugal, Spain, Italy and France (in that order). The group of textile protectionists has now apparently been joined a number of eastern and central European states including Slovenia, the Czech Republic, Slovakia and Poland, thereby increasing the total number of countries in the EU’s anti-free trade lobby to about 11 countries.

Because they outnumber the EU’s traditional free trade proponents -Britain, Denmark, Sweden, Germany and the Netherlands - these 11 states working together can in fact block the emergence of a qualified majority in the bloc’s decision-making council of ministers.

The European Commission, meanwhile, has also taken a tough line. EU trade chief Peter Mandelson has consistently insisted over the last few months that Pakistan did not qualify for GSP Plus because its exports to the EU represented more than one per cent of the bloc’s imports under the preference scheme.

Mandelson told the European Parliament recently that any special concession to Pakistan risked prompting another challenge in the World Trade Organization similar to the Indian-initiated complaint two years ago against an EU decision after 9-11 to give Pakistan special duty free access for textiles in reward for its efforts to fight drug production and terrorism.

And in any case, said Mandelson, “Pakistan is one of the largest GSP beneficiaries whereas GSP Plus is targeted at the most vulnerable states.”

The statement ignored Pakistan’s repeated arguments that in addition to its low income level and the extremely poor diversification of its economy, it was also heavily involved but in the fight against extremism and terror. It also conveniently glossed over the EU’s oft-repeated insistence that trade is an essential “soft” tool in the international combat against terrorism.

But Brussels’ hardline stance on trade may be connected to the EU’s equally vocal determination to ensure that Islamabad signs up a so-called “readmission agreement” under which any Pakistani nationals found living illegally in the EU will be automatically accepted back into the country.

Although the two issues are never linked publicly, EU officials make no secret of the fact that the signature by Pakistan of such an accord -currently only signed by Sri Lanka and Hong Kong - will help the overall relationship between Brussels and Islamabad.

Meanwhile, discussions on the wider GSP are set to continue. EU ministers meeting in Brussels on March 16 failed to agree on the scheme because of differences over graduating Indian textile exports from the system.

Spain, Belgium, France, Portugal and Italy among others argued that Indian exports should not be eligible for tariff cuts because they exceeded 10 per cent of the bloc’s imports under the GSP.

But several other states and the Commission said the graduation limit should be set at 12.5 per cent, allowing India to stay within the scheme.

Meanwhile, the Commission has also said it is ready to set a “danger zone” or informal import limit which, if overshot, could trigger an investigation into Chinese exports of textiles and clothing.

Mandelson told the European Parliament he was keeping a close watch on China’s rising exports to the EU. He said there was “no question” of going back to the old quota system, adding, however, that in order to “increase clarity and predictability,” he was planning to publish guidelines setting out clear “danger zones” for Chinese exporters of textiles and clothing.

“If Chinese import levels in any sector were to reach such danger zones, we would investigate these further, with a view to determining their impact in terms of disruption of trade flows, possible injury to EU industry and the likely impact on producers in vulnerable developing countries,” he said.

The positive impact this development would have on consumers who would benefit from falling prices would also be considered, he said.

European textile and clothing manufacturers have tabled a formal request for EU protection against 12 Chinese products, saying the price and volume of these exports was proof Beijing was indulging in “unacceptable trading practises.”

A statement by Euratex, a federation of European textile and clothing manufacturers, said application of the special safeguard clause included in the World Trade Organisation (WTO) for China should be used against exports of Chinese pullovers, trousers, blouses, tights, socks, women’s overcoats, raincoats, boys suits and girls, dresses as well as women’s underwear.

Overall Chinese textile and clothing exports to the EU grew by 46.5 per cent in value between January 2004 and January 2005 according to China’s own export figures, the European federation said.

In the targeted categories, increases in volume of 625 per cent were registered into the EU-15 with price falls of 36 per cent for jerseys and pullovers, Euratex said.