Dec 13 - 19, 20

Over 1.31 million hectares of the cultivated area was destroyed by floods in the four provinces (Khyber Paktunkhwa, Punjab, Sindh, and Balochistan) and Azad Kashmir, which might compel the country to import many agricultural products including cotton.

Due to the flood damages to the Pakistan's cotton crop for the 2010-11 season, the officials estimate, the country may import 3.5 to 4 million bales. Major distortion took place in major cotton-growing areas of the central Punjab and southern Sindh.

According to a Food and Agriculture Organisatrion (FAO) report, the highest losses were recorded in Punjab where about 661,637 hectares of land with standing crops destroyed. In Sindh, crops on about 357,372 hectares and Khyber Pakhtunkhwa (KP) about 191,020 hectares were damaged as a result of floods. Two million bales have been destroyed in the floods in Punjab. Worst hit areas include Mianwali, Bhakkar, and Layyah, apart from many other areas in southern districts of Punjab.

In Sindh, Nawabshah, Sukkur, Ghotki, Khairpur and Naushero Feroze are the most affected areas.

A report revealed that maximum damage by the floods has been made to the minor crops of Kharif season, which includes jawar, maize, moong, and mash pulses and some citrus fruit. These minor crops are mainly cultivated by small farmers and in areas where growers have small land holdings. They also lost considerable number of livestock. The ministry's report indicated that among the major cash crops the largest loss was seen in the cotton crop.

The estimated loss to the cotton crop in Punjab and Sindh stood at more than Rs75 billion, according to Pakistan Cotton Ginners Association (PCGA). In terms of value, the cotton crop faced more than 30 percent of the total losses to major crops in the recent floods. The association said the floods have affected about 600,000 hectares of cotton growing areas in the country. Cotton crop was sown on 3.4 million hectares, out of which 0.6 million hectares, or 2.5 million bales, were destroyed. Now the production would be about 12.5 million bales against the target of 14.5 million bales in crop season 2010-11.

According to a report of the agriculture department, at least 438 acres cotton (seed cotton) crop was damaged by the floods out of total 1,483 acres sown, depicting a loss of at least Rs32,129 million.

It may be noted that India is the world's second largest cotton exporter. Cotton would also be bought from West Africa and from the United States, Brazil, and the central Asian states. This year cotton output in India reached at a record level of 32.5 million bales, but the country will only allow cotton exports of up to 5.5 million bales. India has permitted cotton exports without licenses.

Free exports of cotton will benefit Pakistan, the fourth largest cotton producing country in the world, which lost a large crop that fuels its export earning of textile industry. India estimates that Pakistan will import about three million bales or more of cotton after floods, from average imports of 1.5 to 2 million bales. Pakistan's textile sector would have to bear a burden of around $900 million for import of cotton to fulfill its immediate requirements.

In Pakistan, as there is no bar on exports, farmers and traders are selling their produce in the international market to fetch better prices. So far, about 800,000 bales have been sold from the 2009-10 crops.

Cotton production in the country has recorded a significant decline of 19.86 percent to more than 8.357 million bales till December 1, 2010 over last year's 10.427 million bales.

According to a consolidated statement of Pakistan Cotton Ginners Association, the arrival has recorded a drop of more than 2.070 million bales in the fortnight. Punjab produced 5.262 million bales, down by 22.36 percent over same period last years while Sindh crop was lower by 15.20 percent to 3.095 million bales over previous year.

Of the total textile mills purchased 6.887 million bales during the period under review while exporters procured 389,070 bales, leaving an unsold stock of over 1.080 million bales at ginners.

Chairman Karachi Cotton Brokers Forum Naseem Usman while commenting on the production said that devastating floods have badly damaged cotton crop and about 2.3 million bales have been destroyed.

On one hand, cotton crops are damaged and on the other textile industry is facing shortage of cotton yarn in the domestic market due to unchecked export of yarn. Availability of cotton yarn in the local markets has reduced significantly creating problems for the textile sector.

The textile sector of the country has to bear a burden of $1010 million as import cost of cotton as the total requirement of mills and spinning sector for 2010-11 is estimated to be around 15 million bales. The private sector had estimated production of lint at about 14 million bales but the actual production may be 11.5 to 12.5 million bales.

The year 2010 may be the milestone in the history of cotton cultivation in Pakistan, as about 11 new local breeds have been developed, which are pest resistant, out of which eight varieties of Bt cotton received the approval of Punjab Seed Council. Similarly, genetically modified breeds are projected as cost efficient, but it decreases not eliminates the use of pesticides and insecticides, experts said.

On the other hand, the European Union is likely to delay implementation of trade concessions for Pakistan, as the WTO Council for Trade in Goods in its meeting on November 30 was unable to agree a waiver for an EU package of trade concessions for Pakistan, set to enter into force on 1 January 2011.

According to information, certain countries requested additional consultations, due to concerns over impacts on their own export sectors and systematic implications for the multilateral trade system. This leaves the package of concessions in limbo at least until April 2011, when the Goods Council next convenes.

India raised numerous concerns at the Goods Council, including with regard to the "collateral" impact on exports in the tariff lines covered by the waiver from other least developed and developing countries. India also pointed to complexities that had not been fully explored, such as the impact of higher-than-usual cotton prices on the world market and implications for downstream producers in Pakistan. As such, India felt the issue had to be further consulted on. Reportedly, the Indian ambassador said at the meeting that "India considers EU's proposal indeed a noble gesture, but we have to look into greater details and required deeper analysis regarding its impact on the multilateral trade regime and competing economies."

Apprehensive of the potential competition, apparel exporters in Bangladesh which enjoy duty-free access to the EU under the General System of Preferences - welcomed the deadlock at the Goods Council. Bangladesh newspaper The Financial Express quoted a high-level official at the Ministry of Foreign Affairs saying, "We are relieved now as the CTG meeting of WTO rejected the proposal of EU to provide Pakistan with waiver facility under MFN (Most Favoured Nations) criteria."

Consultations will continue among interesting parties. The next meeting of the Goods Council will take place in April 2011, added the sources.

It may be noted that the trade concession - covering a range of products from textile and footwear to ethanol to dried mushrooms - had been designed to boost Pakistani imports to the EU in the wake of the flood disaster in July this year. The economy of Pakistan suffered a major setback as the catastrophe unfolded. Overall, the World Bank and the Asian Development Bank have put total loses associated with the disaster at about US$9.7 billion. As a relief response, the European Council agreed in September "to grant exclusively to Pakistan increased market access to the EU through the immediate and time-limited reduction of duties on key imports."

Following concerns among some of the EU member states with important textile sectors, the European Council finally agreed on a watered-down version of the original package in November this year. The final package of concessions comprises two years of duty-free access for 75 tariff lines accounting for 27 percent of Pakistani exports to the EU - mainly in the textiles sectors - worth about 900 million Euro in import value.

These concessions could be extended for another year following an assessment. The deal included certain conditions, such as quota on eight of the tariff lines, which are deemed sensitive and for which duty-free access would be suspended if imports grew by more than 20 percent. As well, a general safeguard mechanism would be put in place to counter any major import surges.

The EU presented package at the Goods Council, stressing that it had taken into consideration possible implications for other developing countries, and noting that the measures were time-bound.

A number of countries, including the US, Mauritius on behalf of the ACP Group, China, Saudi Arabia, Kuwait, Chile, Turkey, Uganda, Colombia, Norway, and Zambia supported a waiver for the EU measure. However, India, Vietnam, Bangladesh, and Peru opposed granting a waiver. They were concerned both about systemic implications of such a waiver for the multilateral trade system and effects on exports from other developing countries with interests in the same tariff lines. These countries suggested initiating consultations on the topic, and were supported on this by others, including Brazil, Barbados, Taiwan, and Hong Kong.