The European Commission outlined proposals today that would unilaterally suspend duties on a range of Pakistani imports into the 27-member European Union for a period of three years. The move which is likely to prove controversial at the World Trade Organisation, comes in the wake of devastating floods in Pakistan and is intended to help bolster the country’s economic recovery.
The proposals suggest scrapping tariffs on 75 product lines the large majority of which belong to the textile and clothing sector. Other products on the list include categories of leather and footwear, as well as ethanol. Together the 75 products comprise 27 percent of current Pakistani exports to the EU.
The EC calculates that an increase in EU imports worth about 100 million euros will occur as a result of the move.
The proposals now need to be agreed to by the European Council as well as the European Parliament where concerns about the impact on the textile industries of countries like Italy and Portugal may pose a few hurdles. But even more problematically a full WTO waiver will be needed before the proposals can be implemented.
Foreseeing objections by Pakistan’s competitors including India, informal talks have already been held in Geneva over the matter. More formal talks aimed at persuading all countries to drop potential objections will now take place according to an EC official.
Explaining the manner in which the final list of 75 products was arrived at, the official said a comprehensive list of key Pakistani imports to the EU was first whittled down to make sure that competitors that were least developed countries would not be adversely affected. Then the concerns of the EU’s own member states followed by the sensitivities of other WTO members like India were taken into account.
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As an example of a “sensitive” product which has been excluded from tariff suspension, the EU trade commissioner Karel De Gucht pointed to bed linen. The reasons for this he explained, were the already dominant position of Pakistani bed linen in the EU (currently 4 out of 10 bed linen products sold in the EU originate from Pakistan) coupled with the fact that the EU itself has a strong bed linen industry.
The trade sops the EU plans to offer Pakistan are in addition to the over 300 million euros in humanitarian aid that has already been promised to the country. The EU’s strenuous efforts to help out Pakistan are motivated in part by fears of increased fundamentalism as a result of the economic destruction wrought by the floods. The United Kingdom has been the EU member that has lobbied hardest for the move. A potential increase in Islamic extremism in Pakistan is perceived as an internal security threat for the UK, given its large number of Pakistani-origin citizens.
The EC said that it hopes all approvals, including the WTO waiver, are fast tracked so that the proposals can be implemented as early as January 2011.