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WTO Approves Package For Pakistan
EU package finally approved facilitating export of 75 items
(by SHABBIR H. KAZMI
)
WTO Approves Package For Pakistan
World Trade Organization (WTO) has approved a comprehensive trade package for Pakistan as a relief measure to help the country overcome devastating impact of 2010 floods. Foreign Office spokesperson Abdul Basit thanked all WTO member countries for their support. He said, the Government of Pakistan (GoP) appreciates the European Union and its member states for their commitment for helping Pakistan in reviving and stabilizing its economy through trade.
Under this package Pakistan will be able to export 75 items, mostly comprising of textile products from 27 member countries of the European Union (EU) states at zero or reduced duty rates over the next two years. There is also an option to extend it for one more year. At present Pakistani textile products are charged 7.19% import duty by the EU members.
The package includes 33 products of non-value added textiles, 23 products of textile garments, 8 WTO Approves Package For Pakistanproducts of home textiles, 4 products of value added leather, 3 products of footwear, 2 products of raw leather, ethanol and one vegetable. However, 15 of these products (mainly high-end) will be subject to Tariff Rate Quota (TRQ) and according to that Pakistan will be able to export these items with a cap of 20% over and above the last three years average exports of these items.
According to initial but scanty details available the package will facilitate Pakistan increase its exports to the EU by maximum US$175 million (annualized) benefiting mostly the exporters of low-end products as cap has been fixed for the high-end products. The imports of these 75 products are valued around 900 million euros, accounting for about 27% of EU imports from Pakistan, according to the EU's waiver request submitted to the WTO. This is two-third of Pakistan's exports to the EU and 20% of its total exports.
Pakistan's contention was assistance may help in overcoming the losses but the country needs a sustainable package for the revival of its economy, creation of new job opportunities and above all help for containing trade deficit, which will in turn lower pressure on country's foreign exchange reserves.
Approval of the package by WTO was a long drawn exercise and can be termed success of Pakistan's foreign policy. It is the first such waiver to be offered on humanitarian grounds. The delay in approval can be attributed to the WTO articles that prohibit any country or trading bloc from extending preferential tariff to any one member and not to all.
It is unusual because the waiver is unprecedented and does not set precedence for similar actions in future. However, the EU asked other WTO members to ignore the usual rules to help Pakistan. It has taken more than a year and a half to remove the concerns of other countries which feared extending this one time waiver to Pakistan would adversely affect their exports to the EU.
Expectations are that the decision will culminate at securing generalized system of preferences (GSP) plus scheme for Pakistan to be effective from 2014, which offers duty-free imports. The EU estimates the preferences would increase Pakistan's exports by 100 million euros. At the same time, the EU was planning to drop high tariff on ethanol from Pakistan subject to an annual quota of 100,000 tons.
Some experts appreciate EU's consideration but strongly believe that instead of asking for concessions Pakistani exporters should try learn to compete in the global markets. As such an increase of exports by 100 million is too small an amount keeping in view Pakistan's growing trade deficit, mainly because of rising oil imports.
Now the real task for the GoP and the business community will be to take maximum advantage of this WTO Approves Package For Pakistanunprecedented package. One of the concerns is that the GoP has been able resolve looming energy crisis and improve law & order situation. The GoP's heavy reliance on domestic borrowing to meet the budget deficit subsequent to the cessation of support from multilateral as well as bilateral sources is also affecting private sector credit offtake and not allowing to accelerate GDP growth rate.
To reap benefit from this package Pakistan will have to focus from cultivation of cotton to achieving highest value addition in textiles and clothing industry. Though, the package helps in enhancing low-end products the ultimate objective should be to take advantage of this breathing space. Exporters should, at their own abstain from exporting raw cotton, yarn and unprocessed cloth.
It should also be clear that increasing export of leather and leather products to EU member countries will not be possible without meeting standards pertaining to protection of environment, particularly not using certain types of dyes. Similarly, adhering to rules is necessary when it comes to export of fresh fruits and vegetables. Two of the areas that need immediate attention of Pakistani exporters of fresh fruits is processing and packing.
Trade Development Authority of Pakistan (TDAP) and Pakistan consulates will also have to play proactive role in creating awareness about rules being followed in the importing countries. However, the biggest challenge will be to improve Pakistan's image and ensuring greater interaction between exporters and importers.
Since foreign buyers are reluctant in visiting Pakistan, local exporters should try to participate in leading fairs and exhibitions. However, before that they will have to develop the websites providing maximum details of their capacities, specifications of products being offered and the track record. Gone are the days when importers wanted to have face to face discussions, send detailed letters and catalogues. Now all this is done through video conferencing and internet.


 
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