Trade with Turkey

Pakistan’s inability to gain favourable diplomatic outcomes from its international allies is becoming a serious concern. While Turkey was one of the few countries to back Pakistan during the FATF meeting, this support has not translated into an easing of trade policy with Pakistan. As a member of the World Trade Organisation, Pakistan has repeated asked Turkey to grant GSP-Plus status to Pakistan. This is in line with Turkey’s obligations as part of the European Union’s customs union. However, Pakistan joins Armenia in the short list of countries that enjoy GSP-Plus status with the EU but do not enjoy the same status with Turkey. Turkey continues to impose high duties on Pakistani products that have high export potential in the Turkish market. This decision was taken in 2011 and Pakistani negotiators have been pushing Turkey to change it ever since. Pakistan’s feeling is that any free trade agreement between the two countries would shift the balance of trade in favour of Pakistani products – but the impasse has continued over seven rounds of talks. Turkey’s offer has been to reduce the duties on Pakistani products by 25 percent, but given that existing duties stand at a high 20 to 50 percent, there is little advantage to be gained from such a small reduction.

In a context where Turkey continues to be granted privileged access to the Pakistani market – both in terms of trade and investment opportunities – this failure highlights the unequal international friendships that Pakistan continues to pursue. The increase in duties in 2011 was enough to push Pakistani export to Turkey down from $906 million to $282 million in 2017. These are the sort of micro-stories that explain why Pakistan’s once bustling export sector has been in decline over the past decade. Instead of pushing Turkey to agree to give Pakistan GSP-Plus status under its obligations under the EU customs union, Pakistan instead chose to follow the Turkey gambit of negotiating a free trade agreement. Pakistan continues to offer the lowest tariffs possible under GSP-Plus status, but Turkey has remained adamant that it is unwilling to concede. The talks are now seen to be on the verge of collapse, and the commerce ministry has asked for high level government intervention. It is surprising that this issue was not on the top of the agenda when Pakistan played host to Turkish President Recap Erdogan two years ago. It is time for the country’s leadership to play their role in pushing the talks towards a favourable conclusion for Pakistan.