The November 5 vote in the International Trade Committee of the European Parliament went yes, despite stiff resistance.

Pakistan was included in the so-called Annex III, which lists the countries that have been granted ‘the special incentive arrangement for sustainable development and good governance’ by the European Union, commonly called the GSP Plus, starting January 1, 2014. The Act now goes to the EU Parliament, which would vote in early December to either accept or reject it, without amendment. But it seems there is no stopping it now!

Textile items have been split into two sections by the EU, namely Section 11(a), which includes all items in Chapter 50 to Chapter 60 of the Custom Tariff; and Section 11(b), which includes all items in Chapters 61, 62, and 63 of the Custom Tariff.

All these items from Pakistan would enter the European Union duty-free starting January 1, 2014 for a period of 10 years. Currently, Pakistani exports of these items have to pay significant custom duties, ranging from 3.2 per cent for cotton yarn to 9.6 per cent for textile made-ups.

Pakistani textile exporters had long grumbled about the duty-free access that Bangladesh’s textile products were enjoying in the EU. This tariff advantage of Bangladeshi textile exports had put local textile exporters to the EU at a disadvantage. In fact, this had created a mad rush of Pakistani textile entrepreneurs setting up shop inside Bangladesh in order to make use of this price advantage enjoyed by that country.

Now, with Pakistan in the GSP Plus club, this cost advantage of Bangladesh in textile products would be gone, and Pakistan would have a level playing field with them. This would also cease the capital outflow to Bangladesh from our textile sector.

Another big advantage is that the world’s largest player in textile exports, China, would no longer be enjoying the GSP facility in the EU, and thus Pakistani products would have a cost advantage of nearly 14 per cent over Chinese products in textile made-ups.

Similarly, another big player in textiles, India, has graduated out from the GSP facility for textiles (Section 11(a)), and it would have to pay MFN duties. Regarding Section 11(b) of textile made-ups, India would be in the GSP (general) category, while Pakistan enjoys the GSP Plus category, with about a 10 per cent duty advantage.

Many other special features make GSP Plus a much more attractive scheme for Pakistan. First, there are no so-called sensitive items for GSP Plus exporting countries. Currently exporting under GSP (general scheme), Pakistani textile exports were classified in the sensitive list by the EU. This made our textile exports vulnerable to EU safeguards, forcing a large volume of our textile exports to suffer MFN duties.

Now, this threat would disappear for Pakistan under the GSP Plus regime. Second, there would be no so-called ‘graduation’ out of the duty-free regime. Under the new GSP regime, safeguards for textiles will only be triggered when our exports in a particular product section exceeds six per cent of the EU’s imports in that section.

In textiles (Sections 11 a, 11 b) our exports to the EU are still below two per cent of the EU’s total imports under these sections. Thus, theoretically, we can triple our textile exports to the EU, and still not have the safeguards triggered against us!

With our current exports to the EU of around a billion dollars in textiles (Section 11 a) and about three billion dollars in textile made-ups (Section 11b), we can make a quantum jump of $6-8 billion in textile sector exports to the EU. And it is needless to lay out the positive spillovers that this mammoth export boost would have on our national employment and economic health in general.

But in the euphoria of getting the GSP Plus, we Pakistanis must not lose sight of the fact that this scheme is, at the end of the day, a ‘special incentive for good governance’. Business leaders of the country must pressure and lobby that our governments abide by all UN conventions on human rights, labour, and environment that Pakistan is signatory to. Failing to be vigilant on this front could lead to quick evaporation of the great expectations.

The writer is the head of trade research at Lucky Cement.