Pakistan can use the European Union’s GSP+ trade incentive package to strengthen its vulnerable economy
akistan’s GSP+ status, which allows our exports preferential access to the European markets, expires on December 31, 2023. GSP+ is a trade incentive scheme that reduces or suspends import duties on the products coming into the EU markets from the developing countries. The scheme is meant to help these countries alleviate poverty by creating jobs and strengthening systems, in compliance with international standards, to protect labour and human rights. Pakistan is one of the beneficiary countries of this scheme since 2014.
Pakistan’s exports to the EU increased from 6.9 billion euros in 2013 to 12.2 billion euros in 2021. These account for nearly 33 percent of Pakistan’s exports and are twice the exports to the USA and thrice the exports to China. The EU is also the third largest source of imports after China and the UAE. Pakistan’s imports from the EU witnessed a 69 percent increase from the 3.3 billion euros in 2013 to 5.6 billion euros in 2021.
The GSP+ status is conditional; it requires compliance with 27 international conventions related to labour and human rights, governance and environment. The EU continuously monitors GSP+ beneficiary countries’ efforts to ensure the implementation of the relevant international conventions.
The European Commission carried out a mid-term evaluation in 2018 and submitted its report to the EU parliament. It concludes that the GSP+ scheme had been effective in terms of fostering sustainable development, improved compliance with human and labour rights standards and job creation in beneficiary countries.
According to labour and human rights activists, while the GSP+ has significantly contributed to strengthening trade relations between the EU and Pakistan, the socio-economic benefits of the scheme have not reached most of the labour force and vulnerable groups in Pakistan.
The EU awarded GSP+ status to Pakistan in 2014 considering it a lower-middle-income country. Pakistan achieved substantial economic stability due to, inter alia, an increase in exports to the EU. However, it again faces severe fiscal deterioration because of domestic and global economic challenges.
It is likely that the World Bank will continue to describe Pakistan’s economy as vulnerable and unable to achieve the upper-middle-income economy status any time soon. This increases the likelihood of Pakistan negotiating with the EU for a new trade incentive package after the expiry of the current one in December 2023.
The EU has proposed certain reforms in the GSP regulations. The new GSP proposal removes the import-share criterion from the GSP+ vulnerability criteria to improve transition and continued access to GSP+ status for least developed countries that will soon rise from the category.
Moreover, the EU has introduced a framework for current GSP+ beneficiary countries to adapt to the new requirements, offering an adequate transition period and requiring the presentation of implementation plans. Furthermore, the EU has increased the burden of compliance obligations for GSP beneficiary countries by adding six more international conventions to the original list of 27 treaties.
Pakistan continues to face issues related to compliance with the current list of 27 international conventions. The EU has repeatedly shown serious concerns with regard to, inter alia, shrinking civic spaces, the death penalty, freedom of religion and belief, freedom of opinion and expression and issues of discrimination against women and minorities.
The additional conventions require GSP+ beneficiary countries to protect the rights of persons with disabilities, prevent children’s involvement in armed conflict, strengthen labour protection through improved inspection and tripartite-ism; and control transnational organised crimes.
Pakistan has already ratified the above-mentioned treaties and protocols. However, ensuring compliance with these treaties will be a challenging task.
Pakistan continues to face challenges related to compliance with the current list of 27 conventions. The EU has repeatedly shown serious concerns on, inter alia, shrinking civic spaces, the death penalty, freedom of religion and belief, freedom of opinion and expression and issues of discrimination against women and minorities.
The EU has also pointed out continued violations of labour rights in Pakistan, including the inadequacy of the labour inspection system, occupational safety and health, ineffectiveness of labour courts, denial of workers’ rights to strike, trade unionisation and collective bargaining, continued harassment and intimidation of the trade union workers and absence of tripartite mechanisms.
We must also keep in mind that the EU parliament adopted a resolution against Pakistan in April 2021 calling for a review of the country’s GSP+ status over the alarming increase in the use of blasphemy accusations in the country and increased attacks on journalists and other civil society actors.
The EU Parliament called on the European Commission (EC) and the European External Action Service (EEAS) to immediately review Pakistan’s eligibility for GSP+ status in light of the events and whether there were sufficient reasons to initiate the procedure for the temporary withdrawal of GSP+ status.
It should be a point of concern for Pakistan given that the EU, during a previous couple of years, has intensified dialogues as well as launched procedures for the temporary withdrawal of GSP+ status of a number of countries due to their poor performance in compliance with labour and human rights treaties.
Pakistan can use the EU’s GSP+ trade incentive package to strengthen its vulnerable economy. Therefore, the government should actively engage with relevant EU authorities on the way to renegotiate and adopt revised GSP+ regulations for the time being and look forward to entering into a possible incentivised trade agreement in future as well.
According to EU’s 2018 GSP+ report, a lack of political will was one of the key reasons behind Pakistan’s complacency towards ensuring compliance with GSP+ obligations. The political leadership should strengthen relations with the EU parliament and democratic structures of the EU member states, thereby learning and replicating their expertise on the way to advancing a democratic culture of political decision-making that is a way forward to achieving respect for human rights, peace and sustainable development.
GSP+ scheme was, is and will be an opportunity for Pakistan’s human rights institutions and civil society actors to engage with their counterparts in the EU, share experiences, seek support, promote solidarity and work together to achieve benefits for vulnerable segments of society. This is one of the key objectives of the EU’s GSP scheme.
Pakistan’s business community, especially the export sector, was one of the primary beneficiaries of the GSP+ trade facility in terms of expanding their export base and profits as well as creating more jobs. The business community’s engagement with their EU counterparts can be helpful in acquiring technical knowledge for the diversification and standardisation of Pakistani products to be exported.
The writer works with the think tank, The Knowledge Forum. He can be reached at email@example.com