GSP Plus and us

Pakistan has not been able to take the expected advantage of the GSP Plus-provided opportunity due to many factors

Our commerce minister recently pointed out that Britain’s exit from the European Union (EU) would not have any impact on our exports to either Britain or the rest of the EU under the Generalised Scheme of Preferences (GSP) Plus arrangement. Thus far, however, Pakistan has hardly been able to avail the potential opportunities provided by our GSP Plus status. Pakistan was granted this status back in 2014 and this was considered to be great news for our economy. GSP Plus meant we could increase exports of textile, leather and other goods to 27 European countries till 2017 without any duties or at preferential rates. This trade concession was meant to provide a major boost to our exports, given that EU accounts for 25 per cent of Pakistan’s total exports. Yet, while neighbouring countries like Bangladesh have managed to increase their exports to the EU due to this facility, our exports to the EU in fact declined (by over 14 per cent during the 2014-15 period).

Pakistan has not been able to take the expected advantage of the GSP Plus-provided opportunity due to a combination of factors. Some of the impediments relate to lack of adequate support to the industries concerned in the form of reliable energy supply, for example. Misplaced economic priorities are another related problem, which lead to the export of raw cotton, rather than ensuring its availability for value-added textile production. There is, however, a host of other reasons, which need to be addressed that have to do with addressing the broader stated objectives of GSP Plus. The EU had basically instituted the GSP Plus status to encourage ‘developing’ economies with low economic diversification and insufficient integration within the international economy to improve their human rights and governance in lieu of special trade concessions.

The GSP Plus status requires implementing over two dozen international conventions under the International Covenant on Civil and Political Rights pertaining to political participation, protection of minorities, gender equality and child protection issues. According to the European Commission’s first assessment report, released just a few months ago, Pakistan has not taken significant steps to help achieve the objectives of the provided special status. Besides the ongoing human rights violations within the country, Pakistan has also not taken sufficient steps to prevent the widespread exploitation of its workers. Ensuring a decent work environment is difficult within the country given the inadequate capacity to implement our existing labour laws. According to ILO estimates, there are less than 400 labour inspectors across Pakistan. The available labour inspectors are also often accused of corruption and of collusion with employers. We have also not made any real progress in terms of preserving workers’ rights to form unions, strengthening social insurance schemes, abolishing bonded labour or eliminating child labour since having become signatories to GSP Plus.

The bulk of labour exploitation takes place in our informal sector, which is much larger than the formal sector, but it is not regulated and thus remains beyond the purview of labour laws or inspections. The issue of environmental degradation is also on the list of conventions we are supposed to adhere to under the GSP Plus status. Yet, instead of focusing on keeping emissions low and trying to improve productivity without exacerbating climate change, Pakistan is instead pressing ahead with fossil fuel generated energy projects with great gusto.

Mechanisms such as the GSP Plus may not be able to revise adverse terms of trade and address the broader inequities of the existing global production system, but at least they can help curb the ‘race to the bottom’, whereby developing countries are outdoing each other in exploiting their local workforce and environment in a desperate bid to secure foreign direct investment or to boost exports. Instead of only focusing on economic factors, which have led to a decrease in exports like textiles when reviewing our performance vis-a-vis GSP Plus, our policymakers must also simultaneously try to provide more protection to formal and informal workers within the country. The consequences of this ongoing neglect are grave since it does not only serve to undermine our ability to retain the GSP Plus status, it will also continue to dampen the future productivity of our workforce, with or without the incentive of preferential trade opportunities.

Published in The Express Tribune, July 29^th, 2016.

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