EU-Pakistan face-off | By Rashid A Mughal

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EU-Pakistan face-off


ACCORDING to the European Commission Directorate-General for Trade, the 10 largest trading partners of the European Union with their total trade (sum of imports and exports) in millions of euro for calendar year 2020 are China with Euros 586 Billion being the largest trading partner of EU followed by USA at 555, UK 444, Switzerland 251 and Russia at 174 billion.

The EU is Pakistan’s most important trading partner, accounting for 12.8% of Pakistan’s total trade in 2015 and absorbing 23.7% of Pakistan’s total exports.

In 2016, Pakistan was the EU’s 41st largest trading partner in goods accounting for 0.3% of EU trade.

The European Parliament this week adopted a resolution calling for a review of trade relations with Pakistan and ending its eligibility for the Generalised Scheme of Preferences (GSP) status. It was overwhelmingly passed — 662 to 3 — with 26 not voting.

EU-Pakistan bilateral trade relations are governed by the Cooperation Agreement from 2004 balancing bilateral trade and investment is also part of the EU-Pakistan 5-year Engagement Plan from 2012.

Pakistan is a major beneficiary of the trading opportunities offered by the EU Generalised Scheme of Preferences (GSP).

From 1 January 2014 Pakistan benefits from generous tariff preferences (mostly zero duties on two thirds of all product categories) under the so-called GSP+ arrangement aiming to support sustainable development and good governance.

In order to maintain GSP+ Pakistan has to keep ratification and effectively implement 27 core international conventions on human and labour right, environmental protection and good governance.

Pakistani exports to the EU are dominated by textiles and clothing, accounting for 82% of Pakistan’s total exports to the EU in 2016.

Pakistan’s imports from the EU mainly comprised of machinery and transport equipment (40.2% in 2016) as well as chemicals (19.5% in 2016).

From 2006 to 2016, EU imports from Pakistan have almost doubled from €3,319 to €6,273 million.

The growth of imports from Pakistan has been particularly fast since the award of GSP+ (€5,515 million in 2014).

The EU and Pakistan have set up a Sub-Group on Trade to promote the development of two-way trade.

The Sub-Group on Trade – set up under the auspices of the EU-Pakistan Joint Commission – is the forum for discussions on trade policy developments more broadly and also aims to tackle individual market access issues which hamper trade between the two parties.

While Pakistan’s economy holds considerable potential, high costs of doing business, complex regulation and infrastructure bottlenecks all have a detrimental effect on trade and growth.

Pakistan’s trade regime and regulatory environment still remain comparatively restrictive.

Textiles and clothing account for over 80% of Pakistan’s exports to the EU. While the textiles and clothing industry are the backbone of Pakistani exports, relying so heavily on one product category carries risks for Pakistan. Trade diversification would play an essential role in this respect.

The granting of GSP+ preferences in 2014 should stimulate Pakistan’s efforts towards diversification.

As a result of GSP+, more than 78% of Pakistan’s exports enter the EU at preferential rates.

Around 80% of the textiles and clothing articles imported to the EU from Pakistan enter the EU at a preferential tariff rate. Around a quarter of these imports are bed linen, table linen and toilet and kitchen linen.

The EU supports Pakistan’s integration into the world economy and its sustainable economic development by granting it GSP+ trade preferences.

This represents almost 20% of Pakistan’s exports globally. The GSP+ preferences also helps Pakistan diversify its export basket.

In order to maintain GSP+ Pakistan has to keep ratification and effectively implement 27 core international conventions on human and labour rights, environmental protection and good governance.

This is closely monitored by the European Commission and also under a permanent scrutiny by the EU Member States and European Parliament, as well as civil society.

Pakistan has bilateral and multilateral trade agreements with many nations and international organizations.

It is a member of the World Trade Organization, part of the South Asian Free Trade Area agreement and the China–Pakistan Free Trade Agreement.

Fluctuating world demand for its exports, domestic political uncertainty, and the impact of occasional droughts on its agricultural production have all contributed to variability in Pakistan’s trade deficit.

The trade deficit for the fiscal year 2013/14 was $7.743 billion, exports were $10.367 billion in July–November 2013 and imports $18.110 billion.

Pakistan’s exports continue to be dominated by Manpower export in the gulf countries, cotton textiles and apparel.

Imports include petroleum and petroleum products, chemicals, fertilizer, capital goods, industrial raw materials, and consumer products.

On 12 December 2013, the European Union granted GSP Plus status to Pakistan until 2017, which enabled it to export 20% of its good with 0 tariff and 70 percent at preferential rates to the EU market. This status was given after the European Parliament passed the resolution by 406-186 votes.

In the first week of May 2021, the EU parliament, however, adopted a resolution by a over whelming majority of 662 to 3 votes (with 26 absentees) to review the GSP+ status to Pakistan.

This has come at a critical time when Pakistan is trying its best to remain afloat with weak economy and being over-burdened with foreign loans.

The EU resolution has come at a time when Pakistan is desperately trying to increase its International trade.

No doubt grant of GSP+ status to Pakistan by EU was big factor in improving the foreign exchange reserves of the country and would certainly harm Pakistan if the same is withdrawn.

Pakistan needs to engage with EU countries individually and EU parliament members at a proper forum to address their concerns.

Sooner it is done the better. Needless to say there may be some nefarious designs of enemies of Pakistan at play who want to cripple Pakistan economically.

They need to be told that Trade and Religion-bias are two separate fields. Mis-conceptions about some one’s religion must not and should influence trading between countries.

True, Europe believes and practices freedom but that freedom should not be a license to hurt other’s religious beliefs.

A false and fabricated move of “Islam phobia” is presently under way, globally, to criticize Muslims and Islam.

It is time for Scholars, writers and intellectuals and saner elements to remove these misgivings. Islam is religion of peace and believes in human dignity.

It reminds me of the historic and excellent speech of H.E King Abdullah of Jordan at European Parliament in 2015, where he received an standing ovation after addressing the misconceptions about Islam and telling the audience what it means to be a Muslim. It is a must see video on YouTube.

— The writer is former DG (Emigration) and consultant ILO, IOM.