No concessions without reform

Pakistan’s bad track record becomes a hurdle in winning substantial trade benefits from Europe.

ISLAMABAD: Pakistan’s track record of bad governance, corruption in public offices and violation of fundamental rights has become a hurdle in winning substantial trade benefits from Europe, as the latest set of “unclear concessions” does not offer much to cheer.

Since 2004, Pakistan has been striving for the Generalised System of Preferences (GSP)-plus status, which offers zero per cent duty on pre-determined tariff lines against imports from developing countries.

However, according to a top official of the ministry of commerce, in addition to other requirements, the major hurdle in the way of obtaining the status is the delay in implementation of 27 international conventions ratified by Pakistan.

These conventions primarily relate to good governance, corruption, illicit traffic, narcotic drugs, political, economic, social and cultural rights, discrimination against women, labour rights, employment, genocide, etc. Domestic laws are yet to be brought in conformity with these conventions.

“The EU has expressed the intention to give GSP-plus concessions from 2014 and for that Pakistan would have to meet the qualification criteria,” said Secretary Commerce Zafar Mahmood.

The EU had extended GSP-plus status to Balkan states and Sri Lanka, but withdrew it from the latter due to governance issues. Pakistan enjoys limited trade concessions, known as GSP, which offers 20 per cent tariff exemption on payable duty.

The European Union (EU) Council on Thursday announced an “immediate and time-limited reduction” in duties on key Pakistani exports to the EU, taking into account industrial sensitivities in the region, notably on textiles. The EU softened its stance in the wake of the worst floods that have submerged one-fifth of the country.

Details of the concessions are still to be worked out by the European Commission, the EU executive arm, in coordination with the World Trade Organisation, to avoid violation of international trade rules and aggravating EU partners such as India, Sri Lanka and Bangladesh.

“They have yet to determine which items will get tariff concessions, the extent of tariff reduction and the timeframe of the concessions,” said the commerce secretary.

Other criterion for the GSP-plus enhanced trade arrangement says exports of the recipient country should not exceed one per cent of total imports of the EU. Pakistan does not meet this condition as its average exports over the last three years amount to 1.18 per cent of EU’s imports.

Pakistan has requested the EU to increase this threshold to 1.5 per cent and Brussels has agreed to initiate the process, but a final decision will be taken by EU parliament.

Pakistan is also seeking similar concessions from the United States through establishment of Reconstruction Opportunity Zones in war-hit areas. This is aimed at giving jobs to locals and earning foreign exchange through exports from these zones under a special tariff regime.

The US House of Representatives has passed the ROZ bill and it is now pending with the US Congress. However, Pakistan is not happy with the bill and is demanding an expansion of the list of items, which can be exported on special tariffs.

Published in The Express Tribune September 18^th, 2010.