‘Pakistan must take advantage of EU’s GSP-plus scheme’

Karachi
Pakistan must take advantage of the tariff preference provided by the EU’s GSP-plus scheme, but this preferential duty regime would not suffice alone to secure sustainable market access to the EU.
This view was expressed at a one-day workshop on “The EU’s award of GSP+ to Pakistan: Prospects for the country’s economy” held at the Area Study Centre for Europe, University of Karachi, in collaboration with the Hanns Seidel Foundation, Islamabad, here on Wednesday.
In her introductory paper, Prof Dr Uzma Shujaat, Director of the Area Study Centre for Europe, highlighted that the intellectual foundations of the non-reciprocal preferences were first laid out in the 1960s, when it was noted that the developing countries’ exports were becoming increasingly reliant on price-volatile, low value-added exports such as agriculture and mineral commodities. The idea for a system of trade preferences to enhance two-way trade flows with the developing countries was first deliberated in 1968 at a UN Conference on Trade and Development (UNCTAD) and a GSP scheme was developed in this context, she added.
According to her, the EU is Pakistan’s largest trading partner after the US. The EU imports around 25% of the country’s products every year. Exports from Pakistan to EU are currently worth around 3.4 billion euros each year. Pakistan mainly exports textiles and clothing products to the EU accounting for over 60% of the total Pakistan exports to the EU followed by the leather products, which account for 13%. Even so, the country ranks only 52nd of the EU’s trading partners despite being the world’s sixth largest nation.
Dr. Uzma Shujaat stressed the need that Pakistan must take advantage of the tariff preference provided by the EU’s GSP+ scheme, but this preferential duty regime would not suffice alone to secure sustainable market access to the EU. “They are merely catalyst. Pakistan must take concrete action and adopt dedicated policies

to address its comparative short-comings vis-à-vis direct competitors,” she added.
Chairman APTMA (All Pakistan Textile Mills Association)Yasin Siddik spoke on the “EU Market and Diversification of Pakistan’s Export-Oriented Industries”.
He said that the Generalized System of Preferences (GSP) was a formal system of exemption from the more general rules of the World Trade Organization (WTO) formerly GATT. “Specially, it is a system of exemption from the most favoured nation principle that obliges the WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their most favoured trading partner. The first step to include in GSP scheme is that you belong to Least Developing Country (LDC). Bangladesh was recognised as LDC prior to Pakistan and got GSP status. Bangladesh boosts its textile industries although it is not a cotton growing country,” he added.
According to him, GSP-plus facility will provide duty free exports of Pakistani products to EU countries and consequently Pakistani products will become more attractive for European buyers because of price difference.
“In the early two years of GSP+ we will enhance our exports to 10% but we are bound by the energy shortage. If the energy situation improves we can enhance our exports to 40-50%,” he added.
Regarding the question of compliance, Yasin Siddik said, “Our industry mainly textile and others prior to GSP+ committed to all the rules and regulations because of our European buyers”.
Senior Economist A. B Shahid said that the GSP facility was meant to assist developing countries in their efforts to promote good governance and help them generate additional revenue via international trade, which could then be reinvested for their development to diversify their economies, adding, but these concessions come with tough conditions.
He mentioned that the regulations governing the award of GSP, specially 27 countries, which a developing country must comply with to get this status.
“That list contains 16 UN & ILO conventions on human and labour rights, and 11 relating to environmental and governance principle,” he added. While presenting the latest statistics of the Global Competitiveness Report of the World Economic Forum, A.B Shahid said that the business community must realise that Pakistan has lost its competitiveness in recent years. “The statistics show that for the fourth consecutive year, global competitiveness of the country went down, and from its global ranking of 101 in 2010-11, Pakistan is now ranked at 133 among the 148 countries ranked in that report,” he added.
Syed Zia Abbas Rizvi, Staff Economist, highlighted the needs of Pakistan along with tariff relaxation under the GSP+.
He said that Pakistan needs to develop its own raw material instead of getting from India, increase production efficiency, enhance reliable export volume and quality and invest in technologies.
Abbas Rizvi stressed that Pakistan should move towards demand driven exports rather than supply driven exports and also work on value addition, saying, “Pakistan is exporting annually more than US $8 billion worth of yarn and fabrics to China, Bangladesh and Turkey, which are Pakistan’s main competitors in the EU’s apparel textile made-ups market”.
In his concluding remarks, Majyd Aziz, former president Karachi Chamber of Commerce and Industry, said that a grant of preferential treatment to a country’s products by a foreign country or a regional bloc did not achieve its desired purpose if there was no passion or sincerity. “If preferential benefits fall in one’s lap, it does not immediately translate into dollars and cents or it does not enhance employment or investment opportunities or it does not create a positive and worthwhile image if there are no pro-active measures undertaken to take advantage of these benefits,” he added.
“There is a Damocles Sword hanging over the nation’s exporters if conditionalities are not met within the given timeframe. We do not know what would be the global political situation in 2016 nor do we know the government’s policies regarding many of the various social conventions. Thirteen European countries are not keen on granting GSP+ status to Pakistan along with nine other countries and this fact shall be given whatever importance required. This is also a veiled warning that any deviation or any lackadaisical approach by Pakistan could very well become arsenal in the hands of those who do not want Pakistan to prosper economically,” Majyd Aziz said.
He elaborated that Pakistan has been blindly adhering to what was called the “Washington Consensus”, which lays emphasis on macro-economic stability through liberalization, privatisation, deregulation, fiscal policy discipline, tax reforms, end to subsidies, etc.
“On the other hand, China has consistently followed the Beijing Consensus and this is manifested in a continuous high rate of GDP growth for the last four decades. It directs innovation, experimentation and of course authoritarianism. The emphasis is on export-led growth and relies on state capitalism as opposed to free market capitalism or socialist planning. It is time for Pakistan to get out of the cocoon and come up with revolutionary policies to get out of the economic quagmire,” he added.
Besides exporting textiles and leather to EU, the country has an export potential for minerals such as barite, chrome ore, iron ore, etc. Moreover, there is a big market for beverages, spirits, vinegar etc.