Following a two-day meeting of European Union foreign ministers in Brussels on Friday and Saturday, Europe is preparing to grant extraordinary trade concessions to Pakistan. The move is intended to bolster the flood-devastated nation and help Islamabad tackle extremism.
The foreign ministers have reportedly opted for an option that would entail a World Trade Organisation (WTO) waiver for key Pakistani exports, primarily textiles. This would allow Brussels to temporarily grant Pakistan a tariff reduction.
Earlier, trade officials had spoken against this move anticipating resistance from India and lengthy litigation at the WTO. A previous tariff exemption granted to Pakistan after the 9/11 attacks on the World Trade Centre ostensibly in recognition of the country’s drug enforcement measures, but widely seen as a reward for its role as an ally in the war in Afghanistan had in fact led to a WTO case initiated by India. The EU had lost and been forced to withdraw the concessions.
However, the thinking in Brussels at present seems to be that since bringing a case at the WTO can take up to a year, there would be enough time for the EU measures to have an impact and then be shut down before the litigation begins. The waiver being contemplated would bring benefits of at least ¤230 million for Pakistan.
Another proposal that sought to eliminate tariffs on 13 specific textile and clothing products on a most favoured nation (MFN) basis was shot down since such a move would benefit India, China and other countries in addition to Pakistan.
Pakistan may also improve its chances of gaining GSP+ status – a European trade incentive mechanism, from which Islamabad has until now been excluded, for amongst other reasons, having an economy that is too large to be eligible.
However, a review is now under way of the criteria for GSP+ qualification, which may allow economies of similar size to Pakistan to also qualify. The review is due to be completed in January.
Following the foreign minister’s meeting, EU Trade Commissioner Karel De Gucht has been asked to carry out a feasibility study, including estimates on the economic cost of the concession. The findings will be presented at an EU leader’s summit on September 16, during which the green light for the move may be given.
