AFTER over six years of tireless efforts, Islamabad has become eligible to apply for duty-free export facility under the EU Generalised System of Preferences Plus scheme.
The ministry of commerce has started preparing an application for submission to the European Commission on January 1, 2013.
The successful states will be named by end of 2013 and the GSP Plus will become operational for new countries from January 1, 2014. Pakistan has fulfilled initial conditions, but still nothing is clear whether it will qualify for the scheme or not. Earlier in 2002, the EU had given to exports from Pakistan concessionary access to its market for three years. Since then it had been pleading its case with the European community for fresh relief.
To fulfill the criteria for GSP PLus eligibility, Pakistan will have to improve its human and labour rights records, as also its environmental and good governance standards. The pre-conditions include effective implementation of 27 conventions which will be a tough task for Islamabad ahead of the submission of its application to the EU.
Even Commerce Secretary Zaffar Mahmood, who is familiar with the issues, has also cautioned the government that any slack in effective implementation of these conventions may cause problem for Islamabad to qualify for the concession in duty. He says government has to start monitoring the implementation status of all these conventions.
Recently, Pakistan had rectified two UN Conventions on anti-torture, civil and political rights. The implementation of these two conventions would pave the way for Pakistan to qualify for the GSP Plus.
Apart from these conventions, less than two per cent exports to EU is another important condition for availing the scheme. Pakistan`s current share in the GSP scheme stands at 1.7 to 1.9 per cent. If the trade share is enhanced to two per cent, Pakistan would automatically be excluded from the next scheme.
In the market share criteria, it seems that Pakistan is not in a comfortable position. Pakistan’s share in EU market will cross the psychological barrier of two per cent in a couple of years. Thus it will automatically be phased out from the GSP Plus scheme. Originally, the GSP Plus scheme is for 10 years with duty-free access on all products to the EU markets.
Members of the EU parliament also negotiated with the EU Council a rule that tariff preferences for the GSP Plus products will be suspended if EU imports from any country grows by 13.5 per cent or more in a year, down from the Commission proposal of 15 per cent, or if imports of specific products exceed six per cent of total EU imports of these products, down from the EU Commission’s proposal of eight per cent.
The update will reduce the number of countries that enjoy preferential access to EU markets from 176 to around 75. It will also reduce the total value of imports that qualify for EU preferences from 60 billion euros in 2009 to about 37.7 billion euros in 2014.
Mr Mahmood said that Pakistan’s exports are expected to grow by 15 per cent following availing of the GSP Plus scheme. If his assessment is correct, Pakistan could automatically be phased out.
Another major problem will be the opposition from the textile producing countries in Europe. The textile lobby will be a big hurdle in Pakistan’s inclusion in the GSP Plus. This lobby is so strong that it stopped the implementation of the one-time preferential package of 75 products for EU imports from Pakistan.
Opposition from leading textile countries — India, Brazil and Bangladesh — and textile lobbies within the 27-member EU delayed not only the implementation of the package but also its effectiveness for Pakistan. Brussels was also working on further amending the proposed package to reduce the preferential tariff on imports from Pakistan under pressure of its textile producing members.
The WTO had on Feb 2 approved the much-awaited waiver on customs duties for these products from Pakistan, which was originally projected to become effective retrospectively from January to December 31, 2012.
The GSP Plus conditions seem to be too tough to be complied with, but Chairman Pakistan Textile Mills Association of Pakistan Mohsin Aziz says Pakistan still have enough time for compliance to the EU terms. “We will try to avail the facility”, he said.
However, he admitted that it would be hard for Pakistan to comply with all conditions including doing away with child labour.
Mr Zaffar Mahmood says in case Pakistan qualified for the GSP Plus , 80-90 per cent of exportable products will be sold duty free to 27- member EU bloc. However, he adds that agriculture produce and sea food are not included in the scheme.
The commerce ministry needs to link market access with the improved capacity of local production with value-addition. The country needs to seek market access for those goods, which can be produced in excess of domestic demand, and have export potential.