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Pakistan prospects brighten for US market on removal of competitors from GSP

By Javed Mirza
January 07, 2021

KARACHI: Removal of India, Turkey and Thailand from US Generalized System of Preferences (GSP) has opened up an opportunity for Pakistan to capture an additional 2.0 percent of the US market under the programme, a policy note prepared by the Trade Development Authority of Pakistan (TDAP) said.

The removal of the competing countries from the US GSP scheme takes effect from January 1, 2021.

“With the available capacity, Pakistan may only capture 2.0 percent of the market share in emerging market scenario amid removal of its competitors under GSP program, whose share in term of value amounts to $4.42 billion or approximately 22 percent of the total market,” the TDAP study noted.

“Hence, if only 2.0 percent of that market share is captured in the emerging comparative advantage that Pakistan has over them is equal to $88.40 million, if only that market share is captured which arguably is in Pakistan’s existing capacity, it considerably equates to the $88 million of additional share.”

Last year US removed Turkey and India from its GSP Program, while 1/6th of the GSP benefit of Thailand was also suspended. Turkey’s termination from GSP was since it was sufficiently economically developed and should mandatorily graduate from the preferential market access to the US market.

India’s termination from GSP resulted from its failure to provide the US with equitable and reasonable access to its markets in numerous sectors that has created serious negative effects on US commerce.

“Due to the underlying development, considerable avenues of expansion may arise for Pakistan to further penetrate in the US market and to capture the market share of Turkey, India, and Thailand under GSP programme as their graduation from these tariff lines provides Pakistan with a comparative advantage over them,” TDAP noted.

Comparison with the exports volume of its competitors in the market, TDAP said that Pakistan’s market share was quite meagre.

It suggested adopting a market-focused strategy to improve Pakistan’s positioning under the scheme and also to capture market share of the removed countries, which was only be possible when focused marketing/matchmaking strategies were adopted.

To achieve the underlying target, Pakistan’s trade officers posted in the US should focus on local products on priority basis in order to penetrate further in the US market, and also try to promote Pakistan as an alternative solution/market for potential buyers that previously sourced from these countries. The note also suggested devising a robust marketing strategy given the emerging market development which has disrupted the supply chain.

The US provides preferential duty-free treatment for over 3,500 products at HS 08 digits from a wide range of designated beneficiary developing countries (BDCs) under its GSP programme.