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Textile quota issue

Current exports worth $1.7 billion may go upto $2.5 to EU

July 16 - 22 , 2001

Exports are considered as the spinal cord in today's economic regime of any country. Unfortunately, we in Pakistan never succeeded to cross the psychological barrier of $10 billion. Accusing finger can be raised at various factors but of no avail at this point of time.

Some of the critics however have the feelings that the actual size of foreign trade would be far ahead than the figures declared.

Unfortunately, the actual size of the export receipts was never reported back by certain quarters. They always took advantage of the system as they say that every law has a loophole. The latest example is the newly emerged sector of information technology where an effective check to ascertain the exact figure of Software exports is practically impossible. It is the patriotism and friendly financial laws at home that can help improving the situation. Since we are talking exclusively about Pakistan's exports it is needless to mention the growth in export sector of other countries in the region which have gone far ahead of us.

Despite talking about diversification in exports for quite sometimes, Pakistan's mainstay is the cotton based textile sector which meets over 65 per cent of the total exports.

In the face of ambitious export targets set for the years to come, Pakistan's textile sector is currently negotiating with European Union, one of the important trade partner of Pakistan. Currently, around $1.7 billion worth of textile is being exported to EU member countries and it is believed that size of exports to E.U may go up to $2.5 billion as soon as quota restrictions on Pakistan textiles are lifted by the E.U countries.

Active players in the textile exports to E.U feel that if EU is really sincere in lifting of textile quota restrictions, it should first withdraw anti-dumping duty imposed in 1979 on certain textile products from Pakistan.

On the other hand, E.U has already lifted quota curbs on Egypt, Turkey and Bangladesh and they have been given the status of Most Favored Nation (MFN) under WTO regime. In any case, under WTO agreement all trade barriers have to be lifted after January 1, 2005. However Pakistan is struggling to carve a respectable place for its textile products before the deadline for doing away with the quota restrictions by all signatories to the WTO agreement.

According to APTMA sources, talks between European Union and Pakistan over the removal of textile quotas before 1st January 2005 were initiated in November last year. Three rounds of negotiations have been held between the officials of both sides but no agreement could have been reached so far.

Abdul Razzak Dawood, Minister for Commerce also led Pakistan delegation in the second round of talks held in Brussels in April 2001.

Customs tariff

EU had been demanding drastic cut in Pakistan's customs tariff for imports from the EU member countries. EU wanted Pakistan's imports of industrial raw material from EU to be zero-rated and maximum duty on other items, including manufactured goods and textile made-ups not to exceed 17.5 per cent. In return EU has offered 5 per cent duty on imports of textiles from Pakistan. In the budget for 2001-2002 government of Pakistan has already reduced its import tariff from 35 per cent to 30 per cent and is unlikely to trim any further to adversely effect its revenue.

Pakistan's exports of textile quota items to EU member countries in the year 2000 were estimated at $963 million as compared to $924 million in 1999 (increase of 4 per cent). There are 15 different textile items, which are subject to quota restraint. The overall utilization of EU quota in 2000 was 79 per cent as compared to 78 per cent in 1999.

All Pakistan Textile Mills Association (APTMA) members are exporting to EU against quota categories of yarn, fabrics and bed linen, annual ceiling of which were utilized above 90 per cent in 2000.

Removal of quota restrictions by the European Union on Pakista's textile exports alone would not be enough if eventually the talks conclude to a mutually acceptable agreement between the two governments.

The EU must also ensure that it would not resort to anti-dumping duty on any Pakista's textiles and would also accord generalized system of Preferential Treatment. Pakistani exporters who are presently content with export of low quality fabric produced in power and auto looms at cheap rates would have to face an open market competition in terms of both quality and price after the phasing out of quota regime on January 1, 2005.

Therefore removal of quota by EU with mutual understanding could be helpful to the textile exporters sincerely engaged in value addition of their textile products

The financial wizard in Pakistan however are confident to hit the export target of $10.6 billion set for the current fiscal in view of various corrective and supportive measures taken in the recently announced trade policy.