EU aid increase

The European Union’s announcement that it plans to increase aid to Pakistan in the wake of the floods is welcome news. However, one hopes that it does not come at the expense of the planned trade concessions from the 27-member bloc that collectively forms the single largest market in the world. The EU has been delaying increasing Pakistan's access to European markets, mostly out of the protectionist fears of prominent members like France. In the aftermath of the floods there had been movement to grant a temporary decrease in tariffs to Pakistani goods in order to help the economy recover but this newspaper is sceptical of the utility of such a time-limited access to European markets.

Most goods that Pakistan exports to the EU are from the textile sector. The textile and garments sector worldwide operates with integrated global supply chains, meaning that buyers seek to engage in long-term contracts with suppliers in order to maintain their “just-in-time” business model. A temporary decrease in tariffs from the EU would be nothing more than a symbolic gesture since most European buyers would not be willing to grant Pakistani manufacturers long-term contracts owing to the time-limited nature of the trade concessions.

We do not question the sincerity of the EU to help the people of Pakistan. We do, however, question the efficacy of their methods. The €320 million pledge for aid is taken with gratitude but far more useful would be permanent access to European markets that allows Pakistanis to earn their way out of poverty and destitution. For the past several years, EU officials have been harping about several reforms that Pakistan needs to undertake before such access can be granted. Yet this is perverted logic: a more prosperous economy is likely to create the space for the political reforms the EU is seeking rather than the other way around.

Published in The Express Tribune, October 4^th, 2010.