Deconstructing the GSP-Plus status

October 3, 2021

The EU decides to continue with Pakistan’s GSP-Plus status till 2024 despite the passing of a resolution calling for a review. The worst, however, may be far from over yet

Deconstructing the GSP-Plus status

Despite stiff opposition by the European Parliament and the passing of a resolution calling for the European Commission (EC) to review Pakistan’s GSP-Plus status, a system of unilateral trade concessions that aids in boosting exports of developing countries, the country has managed to secure an extension till January 2024.

Pakistan had clinched the Generalized System of Preference (GSP) plus status backed in 2014 under the Pakistan Muslim League (PML-N) dispensation with hopes that exports to EU would double on an annual basis. Pakistan was granted GSP-Plus status when Islamabad had agreed to implement 27 UN Conventions; hence, progress on all 27 conditions was to be monitored.

The European Union, which comprises 27 member states, is the largest exporting partner of Pakistan mainly because Pakistani products have a duty-free access to EU on 91 percent tariff lines under EU’s Special Incentive Arrangement for Good Governance and Sustainable Development, known as GSP-Plus since January 1, 2014.

Pakistan’s total trade volume to the EU has jumped up from USD11.96 billion in 2013-14 to USD14.158 billion in 2018-19. However, owing to a variety of reasons, Pakistan could not fully utilise the available concessions. Nevertheless, its exports to the EU did roughly double. Bangladesh too had obtained full benefits, and therefore, increased its exports to the EU after availing duty concessions.

The GSP-Plus status is crucial to boosting Pakistan’s trade and economy. Shahid Sattar, Secretary General and Executive Director of All Pakistan Textile Mills Association (APTMA), says that without GSP-Plus, Pakistan’s exports will “crash to USD6 billion -- throwing us off the track of export-led sustainable development with the consequent loss of jobs, and companies going bust”.

In April 2021, the EU Parliament, through a resolution, called on the Commission and the European External Action Service (EEAS) to immediately review Pakistan’s eligibility for GSP- Plus status in the light of concerning human rights violations, and determine whether this is sufficient reason to initiate a procedure for the temporary withdrawal of this status. Charlie Weimers, a Swedish Member of European Parliament (MEP), who co-authored the resolution, made a speech during the EU parliament’s session held in April 2021 citing various incidents where members of religious minorities were killed or imprisoned in Pakistan over blasphemy accusations.

However, the European Commission (EC) was not able to establish a consensus on this matter; instead, it decided to continue Pakistan’s GSP-Plus status for the next two years. There are reasons for this decision. The GSP-Plus cancellation process would require more time. Secondly, Pakistan helped the EU in ensuring a safe exit from Afghanistan in the aftermath of the August 15 scenario when the Taliban took over the country.

A temporary withdrawal of a country’s GSP- Plus status is an option of the last resort when all other means of political dialogue and engagement do not produce the necessary results. The latest review relates to the EU Regulation establishing the EU’s GSP framework, which expires at the end of 2023. Hence, it is not a review of individual GSP- Plus beneficiaries, per se.

The worst, however, may still be far from over. It is going to be challenging for Pakistan to apply for the next GSP-Plus scheme commencing from January 2024 to 2033 as the EC has inserted seven more conventions for status eligibility. These conventions pertain to greater accessibility for people with physical disability, the eradication of child labour, and environmental safety. The Commission, which reviewed the status of several other countries along with Pakistan, said talks will continue with the EU-Pakistan Joint Commission.

In its statement, the EC iterated that the Commission, together with the European External Action Service (EEAS), is closely monitoring the political developments in Pakistan and the country’s respect for the relevant UN/ILO Conventions.

It is going to be challenging for Pakistan to apply for the next GSP-Plus scheme commencing from January 2024 to 2033 as the EC has inserted seven more conventions for status eligibility.

The EC stated that it had “taken note of the matters raised and the issues highlighted in the EP Resolution on Pakistan (April 29, 2021), which has received significant coverage also in Pakistan. We have discussed it and its content with the Pakistani authorities, through our delegation and here in Brussels”.

The News on Sunday (TNS) contacted the EU office based in Islamabad about the decision to continue Pakistan’s GSP-Plus status till 2024 despite the passing of the resolution against Pakistan means for the country, and how Pakistan fared in its performance on the 27 EU conventions.

The European Parliament, among other things, called on the European Commission “to immediately review Pakistan’s eligibility for GSP- Plus status […] and whether there is sufficient reason to initiate a procedure for the temporary withdrawal of this status,” says the EU spokesperson referring to the April 29 resolution.

The resolution is a call for review, not directly a call for revocation of the GSP- Plus status, which would be the prerogative of the European Commission, the executive branch of the European Union. Taking note of the political signal from the European Parliament, the EU has continued its engagement with the government of Pakistan regarding the implementation of the 27 international conventions under the current GSP- Plus system.

“The monitoring process is ongoing with reinforced scrutiny. The EU is in regular contact with the Government of Pakistan to discuss the progress, and the lack thereof, regarding the implementation of the relevant conventions. No decision has been taken yet on status as it depends on on-going analysis of progress. Pakistan will continue enjoying the trade benefits of GSP- Plus as long as there isn’t any decision for suspension or revocation,” says Androulla Kaminara, the EU Ambassador to Pakistan.

To another query about incorporation of seven more conventions for making countries eligible to apply for next GSP-Plus status for 2024 to 2033, the spokesperson says that on September 22, the European Commission put forward a proposal for a new regulation (equivalent to a law) for 2024-2033. The proposal will now be analysed, discussed and revised by the European Parliament and the Council (which comprises the EU member states). The final new regulation is planned to be agreed upon in 2022, sufficiently ahead of the expiry of the current regulation.

The EC proposal updates one convention (Paris Agreement replacing the Kyoto Protocol) and adds five international conventions. That means if the EP and Council agree, the new GSP- Plus system would have 32 conventions in total.

Pakistan has ratified all of the 32 conventions, including the proposed ones. All potential GSP- Plus beneficiary countries, including Pakistan, will have to re-apply for GSP- Plus status under the new regulations. For existing beneficiaries, there will be a transition period during which candidates will have to demonstrate their commitment to all 32 conventions via the progress made so far and a realistic and concrete work plan for the implementation of the conventions. The decision to grant GSP-Plus status under the new regulation will be taken by the European Council and the European Parliament (unlike the decision to maintain or revoke the existing GSP-Plus status, which is the prerogative of the European Commission).

When asked about major concerns of EU and EC and what needs to be done to qualify for the next phase of GSP-Plus, the EU Ambassador to Pakistan says that in its regular reports to the European Parliament and European Council, the European Commission highlights the progress and the weaknesses of GSP-Plus beneficiary countries’ efforts in implementing the related international conventions. The last report was presented in February 2020.

The report did recognise progress in some areas but the EU has raised concerns about media freedom and space for civil society, limiting the scope of the death penalty, labour rights and inspections.

Pakistan, therefore, needs to present robust evidence of progress made since the last report. The progress will have to be tangible with visible effects on the ground in order to convince EU lawmakers of Pakistan’s commitment to the conventions. In areas where legislative action is needed, the main yardstick is laws that have been passed (and not those under preparation or debate). In areas where the implementation of laws is needed, evidence of the implementation, such as case statistics and achievements of relevant institutions among other indicators will be looked at, the EU Ambassador to Pakistan concludes.

The writer is a senior staff reporter of The News International, Islamabad

Deconstructing the GSP-Plus status