After twenty months, the proposed European Union (EU) trade concessions aimed at helping Pakistan’s economy to recover from losses inflicted by floods in 2010, have become political baggage for the 27-member confederation rather than measures meant to lessen Islamabad’s economic woes.
In the latest blow, dashing Pakistani exporters’ hopes of making significant gains from the proposed trade concessions, the EU has decided to cut the waiver period from 36 months to just 18 months. It has also decided to place ceilings on the quantity of duty-free goods being imported from Pakistan.
Earlier, in February this year, the World Trade Organization approved the compromised concessions package by making 20 products subject to quotas and reducing the effective period to two years with an option to extend it to the third year. In September 2010, the EU had announced that it would waive duties on import of 75 items from Pakistan for a period of three years. These 75 products’ imports are worth almost $1.2 billion, or about 5% of Pakistan’s overall exports.
The decision has been taken by the Permanent Representatives Committee, known as Coreper. The committee is responsible for preparing the work of the Council of the EU and occupies a pivotal position in the decision-making system. The forum keeps political control over the work of the expert groups.
“It is not just trade measures but an issue of political credibility for the union, therefore we will not go back on our commitments,” said EU Ambassador to Pakistan Lars-Gunnar Wigemark while talking to The Express Tribune.
Wigemark rejected that the trade concessions proposal has been shelved. “It is alive, kicking and going into the final phase,” he declared.
Without disclosing details since the deal is not formally approved, Wigemark said that some conditions of the package have been changed, which should not surprise people due to economic situations in some of the member countries. “It is not uncommon having concessions with limitations,” he added.
A Pakistani diplomat working in Brussels said the “economic benefits of the package have almost eroded and the only importance of the concessions, for both Pakistan and EU, is claiming political victory. According to initial estimates, the waiver could increase exports to $300 million and with the latest proposed changes the benefit would be less than $100 million, or just 0.3% of last year’s total exports.
The EU reduced the time period and made five more products subject to tariff rates quotas after some member states refused to sanction the concession package following deepening economic crisis in their states. They also questioned whether Pakistan’s industry will be able to deliver amid the prolonged power outages.
During discussions the members states were largely divided into two groups, one advocating shelving the deal due to economic difficulties while the others arguing to honour the political commitment.
With EU stepping back from its promises, the chances of getting Generalized System of Preferences (GSP) plus status by 2014 have also diminished. The GSP plus promises general duty waiver on all products imported from selected developing countries.
Published in The Express Tribune, May 13th, 2012.
More in BusinessWeekly Review: Stock market undergoes correction