EU PACKAGE FOR PAKISTAN
FOCUS SHOULD BE ON IMPROVING COMPETITIVENESS RATHER THAN SEEKING FAVOURS.
SHABBIR H. KAZMI
June 25 - July 1, 2012
According to some media reports, European Union has decided to cut the waiver period from 36 months to just 18 months. It has also decided to place ceilings on the quantity of duty-free goods being imported from Pakistan. This has dashed Pakistani exporters' hopes of making significant gains from the proposed trade concessions. However, much earlier some experts from Pakistan had started saying that instead of seeking paltry concessions, Pakistan should have strived harder. They were right because the country is mostly likely to achieve $25 billion export target despite many odds, worst being extensive and perpetual load shedding of electricity and gas.
Earlier, in February this year, the World Trade Organization approved the compromised concessions package by making 20 products subject to quotas and reducing the effective period to two years with an option to extend it to the third year. In September 2010, the EU had announced that it would waive duties on import of 75 items from Pakistan for a period of three years. Exports of these 75 products contribute almost $1.2 billion, or about five per cent of Pakistan's total exports.
The decision has been taken by the Permanent Representatives Committee that is responsible for preparing the work of the council of the EU and occupies a pivotal position in the decision-making system. The forum keeps political control over the work of the expert groups. The message received from the EU rejects the perception that the trade concessions proposal has been shelved. There are not just trade measures but also is an issue of political credibility for the Union. Therefore, it just can't go back on the commitments.
While details are yet to be made public, it is most likely that some of the conditions included in the package initially have been changed. This should not surprise people because economic situations in some of the EU member countries have changed.
Experts say that economic benefits of the package have almost eroded and the only importance of the concessions, for both Pakistan and EU, is claiming political victory. According to the initial estimates, the waiver was likely to boost exports by $300 million but with the proposed changes, the benefit would be less than $100 million, or less than half a percent of last year's total exports.
The EU reduced the time and made five more products subject to tariff rates quotas after some member states refused to sanction the concession package following deepening economic crisis in the member countries.
Pakistan's capacity to deliver has been questioned due to prolonged power outages. The members countries were largely divided into two groups, one advocating shelving the deal due to economic difficulties while the others insisting on honoring the commitment. However, the real concern is that with the EU stepping back from its promises, the chances of getting generalised system of preferences (GSP) plus status by 2014 have also diminished. The GSP plus promises general duty waiver on all products imported from selected developing countries.
In February this year, WTO's Council for Trade in Goods had approved the EU waiver on customs duties for 75 items, mostly textile related, from Pakistan to help the country recover from 2010's floods. The Union had offered this one-time facility to Pakistan and approached WTO in October 2010 to seek a waiver on trade preferences to Islamabad on these products amounting to almost 900 million euros in import value, or 27 per cent of imports from Pakistan for a two-year period from January 2012 to December 2013.
Over the days, two opposite opinions have developed in Pakistan. First group says it was a good gesture by the EU but with the bloc plunging deeper into problems, Pakistan may not get much. Second group says instead of 'seeking mercy' Pakistan should concentrate in developing homegrown plan for boosting exports. They also say that despite the worst energy crisis, Pakistan is likely to record above 3.5 per cent GDP growth rate and exports around $25 billion during FY12. A little focus on agriculture and resolution of energy crisis can help in producing exportable surplus. Focusing on export of Halal good items and horticulture can also help in earning additional foreign exchange.
This year, Pakistan is not likely to export mangos to Iran due to economic sanctions. This gives an opportunity to divert these exports to EU. As a first step, exporters of fresh fruits should completely understand the rules governing entry of horticultural products into the union. It may look like an enormous challenge and offers immense opportunities.
Pakistan's export of seafood to the EU member countries also faces serious problems. The concerned government departments as well as the private sector have not been able to remove EU apprehensions. Some efforts were made in the Pakistan but the issues have not been resolved on permanent basis.
In the EU market and more specifically in the United Kingdom, India poses huge challenge for Pakistan. A large number of Indians and Pakistanis live in United Kingdom and have more or less similar preferences. At times, quality of Pakistani products is superior to Indian products but lack of appropriate packing and packaging, branding and even marketing by the Pakistani exporters enables Indian exporters to gradually intrude into the markets which were considered stronghold for Pakistan.
Focusing on export of ethnic jewellery, bridal dresses, leather and sports goods, Halal products, molasses, and ethyl alcohol can help in earning millions of dollars. In this regard, Pakistan's diplomatic missions in EU member countries will have to play more active role as well as TDAP will have to take more trade delegations and ensure participation of Pakistani exporters in fairs and exhibitions being held in EU member countries.
Over the years, Pakistan and Germany have enjoyed very cordial trade relationship. Pakistani exporters are advised to enhance their interaction with Pakistan-German Business Forum.