PROSPECTS OF PAKISTAN GETTING EU GSP+ STATUS

TARIQ AHMED SAEEDI (tariqsaeedi@hotmail.com)
Dec 22 - 28, 2008

While Pakistan's prime minister Yusuf Raza Gillani has appealed European Union to assign Generalized System of Preferences plus (GSP+) status to Pakistan in order to provide the country's products greater access in EU market, the request seemed to be fruitless and probably partially entertained given the finalization of list of GSP plus beneficiaries; yet opportunity of inclusion of Pakistan in the midway of three year period (2009-11) is open. In addition, the commission is still investigating the eligibility of Sri Lanka and El Salvador for the tariff preferences.

Last week in a meeting with visiting Swedish foreign minister Carl Bildt prime minister has formally sought support of Sweden that will assume the EU presidency by July 2009 in underpinning Pakistan's entry in to the list of beneficiaries of GSP plus regulations effective from January 2009, application date for which was expired in October this year. But, consideration to application will be undertaken in mid 2010. While Swedish foreign minister who has also been premier of this western European country from 1991-94 did not respond to the request, he assured him of Swedish support in the EU to help Pakistan cope up with present economic difficulties, emphasizing issues related to terrorism and law and order and Sweden assistance to equip law enforcement agencies for meeting security challenges and prop up Pakistan's stance against terrorism.

The focus point of his talk is quite comprehensible as EU GSP system grants tariff benefits to those economies which are obliging certain conventions of ILO, UN, guidelines of global environment protection, and other predefined rules. It has not included arrangements for countries affected with militancy or social crimes.

Generalized system of preferences introduced in 1970s provides developing and least developed nations with tariff preferences so that they enhance revenue in international trade through imports. Factoring in as more as 100 percent preferential margins for non-sensitive products that do not afflict material injury to EU industry these trade preferences unfold on the bases of extent of vulnerability of countries. Briefly, different special incentive arrangements in shape of reduction and concession of import duties help beneficiaries to improve governance, eradicate poverty and promote sustainable development. It is said that abiding by the rules of WTO preferences ensure that nation's common trade policy be consistent with the common development policy

Recently, EU has assigned duty free access to products from 16 countries vetting and implementing certain ILO and UN conventions. With extension in tariff advantages available in GSP, the GSP plus system has provided these developing nations with benefits across 6400 tariff lines.

After the enlargement of EU block with entry of 10 new members in May 2004, the block has become a huge, lucrative market for large numbers of exporting countries across the world. Generalized plan regulations are rolling out tremendous opportunities for developing nations with manageable resources and productive manufacturing and agriculture industries to expand volume of their exportation and product line and range across 25 destinations of EU that observes suspension of common custom duties in general arrangement of GSP plus depending on the sensitivity of community products to importing products. Wide range of products is totally or partially exempted from import duties, thereby leveraging optimal price competitiveness in EU market. Despite that few agriculture components do not enjoy heavy tariff benefits, the block is still the world's biggest importer of agricultural products from developing countries, importing more than the United States, Canada and Japan.

While benefits are enormous, beneficiaries equally face temporary withdrawal in case of infringement of rules governing external trade of the block. The embargo on Pakistan fisheries in EU market was in line with contravention of rules, causing heavy loss to country's sea food export revenue. Normally, withdrawal of GSP status takes seriously in account adherence of beneficiaries to rules regarding fisheries and fisheries resources. In past, Pakistan was dispossessed of GSP insignia because of its alleged violation of regulation and owing substantially to lobbying of India which raised hue and cry over the granting of GSP to 12 countries including Pakistan.

The EU was apprised of its inadvertent overriding of rules inscribed in the constitution of world trade organization through the conferment. The complaint was that Pakistan and Guatemala were dumping ethyl alcohol which according to Committee of Industrial Ethanol Producers was afflicting material injury to EU industry. The lost to Pakistan's ethanol exports heightened following the withdrawal as it was reported that two out of seven distillers were closed down due to drawdown in output demands and its uncompetitive price following restoration of duty levies. Pakistan has been a largest exporter of ethanol (50 million liters), second after Brazil (55 million liters), to EU. Excluding special arrangement for combating drug trafficking replacement of anti drug regulations with new GSP plus system has not Pakistan gotten entry afterwards.

European countries account for 20 percent of world import and export and have highest portion in total exports from Pakistan. Both eastern and western European countries imported $5.5 billion worth of products from Pakistan in FY08. And, in last seven years 10 percent CAGR has been recorded in the export volume. The export growth rate may be dampened by contraction in buying of products exported from Pakistan, but the intensity will not likely to eat away major share. In spite of that, export to EU needs to increase further.

As regulations determine the selection of beneficiary qualification of Pakistan in EU GSP plus regime depends on amendments or induction of parameters covering the vulnerability of Pakistan to bouts of terrorism. Given the present criteria, otherwise, it is too difficult to foresee minus import duties export to EU. Apart from this, trade volume and economic situation in the country is not as worst as to attract special incentives or trade supports. The current list of GSP plus beneficiaries comprises of far more economically deprived least developed countries of the world.