EU to suspend duties on 75 Pakistani products

BRUSSELS: Jeans, slippers and truffles will be among 900 million euros ($1.3 billion) in Pakistani goods allowed into the European Union duty-free from next year under EU plans for trade assistance to the flood-hit country.

The scheme, unveiled on Thursday, will suspend tariffs on 75 types of Pakistan-made goods which account for about 27 per cent of exports to the EU, boosting sales by about 100 million euros.

The move is meant to help Pakistan recover from devastating floods and maintain political stability. In parallel, Islamabad has agreed to take back illegal migrants returned by EU states.

Most of the trade concessions will be on textile exports, though there will be no tariff cuts on Pakistan’s main product - bed linen - because of EU industry opposition.

“This proposal will offer a real boost to Pakistan’s economic recovery, while at the same time taking into account sensitivities of EU industries,” EU trade chief Karel De Gucht told reporters.

The plan foresees suspending tariffs for up to three years, and will include monitoring to ensure exporters from other states do not try to smuggle their wares into Europe via Pakistan to avoid duties.

It must be approved by EU governments, the European Parliament and members of the World Trade Organisation, including India, Sri Lanka and Bangladesh, which compete with Pakistan for textile sales to Europe. EU officials said they hope for full approval by January.

EU manufacturers criticised the plan for including sensitive products such as cotton yarn, fabrics and towels, in which the European industry is already struggling to compete with countries that have access to cheap local cotton.

“We don’t believe our textile and clothing industry should have to pay for what Europe is giving to Pakistan,” said Luisa Santos, head for international trade issues at EU textile and clothing lobby Euratex.

“This will not help regular Pakistanis. This will help a couple of companies that already have turnover of more than 200 million euros,” she added.

Among companies that could gain from the plan are Pakistan’s largest listed textile company, Nishat Mills Ltd and Sapphire Textile Mills.

Reeling from floods that have displaced millions, Pakistan has said it urgently needs greater market access to help stabilise its economy, and has said militants could exploit its economic crisis and any political instability.

The plan was unveiled on the same day as EU ministers approved an agreement with Pakistan that allows either side to return any illegal migrants to their country of origin.

Britain, Sweden and Germany pushed for the trade benefits, but France, Italy and other EU states with domestic textile and clothing industries were reticent at a time of economic stress. Others say the concessions will do most harm to Bangladesh.

“This is robbing Peter to pay Paul,” said one trade expert from a country outside the EU. “The only reason it will go through is because of political relations in the region.”

Products affected by the tariff suspension include cotton yarn, woven fabrics, cotton jackets, trousers, baby clothes, socks, gloves, sandals and mushrooms. The tariff break also allows for 100,000 tons of ethanol per year.

Published in The Express Tribune, October 8^th, 2010.