EU-PAKISTAN TRADE RELATIONS

S.KAMAL HAYDER KAZMI,
(feedback@pgeconomist.com)
Research Analyst
, PAGE
Jan 31 - Feb 6, 2011

The European Union remains Pakistan's largest trading partner receiving 27.4 per cent of Pakistan's exports and providing 17 per cent of its total imports. The overall volume of trade between the EU and Pakistan was worth euro 5.06 billion in the year 2002 with a trade surplus of euro 765 million in Pakistan's favour.

Pakistan's trade with the EU is mainly composed of textiles, which account for over 60per cent of the total Pakistani exports to the EU, followed by leather products, which account for 13 per cent of the total Pakistani exports.

Pakistan's export structure lies very much on a traditional product mix. The imports from the EU to Pakistan mainly comprise finished products like mechanical and electrical machinery, which accounts for over 35 per cent, followed by chemical and pharmaceuticals for 10 per cent of the total EU imports to Pakistan.

Trade with Europe is clearly in Pakistan's favour. There is however scope for more mutually beneficial commercial activities.

Increasing trade with its main partners, and with the EU, is part of Pakistan's economic revival agenda. Textiles and clothing is an important sector for EU-Pakistan trade relations. An MoU was signed in 2001 between the EC and Pakistan whereby the EC agreed to increase by 15 per cent the quota for textiles and clothing for the latter. This formed part of the package of measures attributed to Pakistan after 9/11.

Pakistan also benefits from the EC's General System of Preferences (GSP) designed to foster sustainable economic development by providing tariff preferences to various countries. In 2002, Pakistan's exports of clothing products to the EU increased by 25 per cent. Due to increased competitiveness, other sectors of Pakistan have lost the benefit of GSP treatment since beginning of 1998, such as leather, raw hides and skins, articles of leather and fur skins and textiles.

A number of sectoral agreements have been signed by the EC and Pakistan like agreement for commercial, economic and development cooperation, which dates from July 1985 and builds upon the first such agreement signed in 1976 and agreement on trade in textiles products. The EU is Pakistan's first trade partner in textiles.

The EU aims of course at increased bilateral trade with Pakistan as trade is recognized as the engine of global economic growth largely thanks to the multilateral trading system. The rule-based, open, multilateral, international trading system is a key factor in global prosperity to all partners. The EU wants to see these advantages extended and therefore is strongly in favour of an outcome of the WTO trade negotiations, which should entail concrete gains in particular, for developing countries and contribute to better enhance benefits and limit risks arising from the globalization process.

Quite recently, the EU has initiated an offer in the WTO Geneva in the negotiations on trade in services under the Doha Development Agenda (DDA).

EU-PAKISTAN TRADE DURING 2008 (000 EURO)

COUNTRY IMPORTS EXPORTS COUNTRY IMPORTS EXPORTS
Austria 31.997 100.712 Latvia 2.811 1.728
Belgium 268.08 225.976 Lithuania 12.212 3.767
Bulgaria 10.509 75.941 Luxemburg 170 1.852
Cyprus 6.08 2.618 Malta 1.065 383
Czech Republic 31.558 91.76 Netherlands 293.151 270.267
Denmark 62.905 55.988 Poland 47.599 43.196
Estonia 11.743 1.229 Portugal 89.552 7.987
Finland 23.853 121.706 Romania 17.857 81.53
France 323.415 388.387 Slovakia 11.02 5.174
Germany 616.478 832.704 Slovenia 6.955 18.653
Greece 61.572 29.558 Spain 355.855 91.415
Hungary 16.984 57.888 Sweden 74.371 250.072
Ireland 26.242 22.179 UK 723.677 582.885
Italy 494.61 542.584 - - -

In addition, the EC and Pakistan also cooperate in WTO multilateral trade negotiations and key aspects of the DDA. These include among others special and differential treatment provisions including a package of results with real value-added for developing countries after the Cancun ministerial conference, implementation of developed countries' commitments in the field of trade related technical assistance, as an important underpinning of the DDA negotiations and their implementation, and specific sectoral negotiations such as in services and non-agricultural (industrial) products, where WTO should seek ambitious tariff reductions in sectors of key export interest to developing countries.

CONCLUSION

The trade relations between EU and Pakistan play an active role in the in the world. By some estimates, Pakistan has an immediate requirement for up to $20 billion in infrastructure development that could provide good opportunities for EU exporters and investors. A major privatization effort in the telecommunications and financial sectors should offer additional markets for EU producers and investors. Today, foreign investment by EU member states in Pakistan is dominated by the UK, followed by the Netherlands and Germany. The trade development and the promotion of business and institutional links represent about 10 per cent of the EC's development budget for Pakistan.