Fading hope for EU tariff cut
THE textile industry fears further delays in the unilateral, temporary and limited tariff concessions announced by the European Union one-and-a-half year ago to help Pakistan recover from losses of the 2010 devastating floods.
The industry’s fears stem more from the lingering debt crisis facing the euro zone rather than the opposition of tariff waivers.
“The EU is not going to implement the promised tariff concessions until it can solve its own problems,” insisted a leading Karachi-based garments manufacturer who requested not to give his name.
“The major textile producing member countries of the EU — Spain, Greece, Portugal and Italy, which had objected to the trade discount package for Pakistan from the day one, are facing the worst crisis of their history. Growth is slowing and jobs being lost. How can they allow us tariff concessions now when they were not ready for this when they were much better off?,” he asked.
The 27-nation bloc had announced limited trade discounts for 75 imports, mostly textiles and clothing, from Pakistan for two years towards the end of 2010. But the implementation has since hit delays because of objections raised by various textile exporting nations, including India and Brazil, at the World Trade Organisation (WTO) whose waiver was required for putting the incentives into effect from January 1, 2011. The objections have since been withdrawn and a WTO waiver obtained.
Still the concessions remain unimplemented due to opposition from some the textile producing EU countries although the measures have largely been diluted to address their concerns. The redrafted ‘compromise package’ increases the number of products under quota from 20 to 26 with a quota ceiling of 120 per cent of past trade based on 2007-09.
The May visit of EU Security and Foreign Affairs Chief Catherine Ashton had raised hopes of an ‘early implementation’ of the
package after its approval at a trialogue involving European Council, Commission and Parliament in Brussels. Still there are no signs of its implementation.
“Who will risk permitting this at a time of economic depression staring the eurozone in its face when these trade incentives were being perceived as a real threat to their jobs?,” another textile producer wondered.
Initially, the tariff concessions were estimated to boost Pakistan’s exports to the EU, the largest trading partner of the country, by about $300 million over a period three years. The estimates have substantially been cut ever since the package was redrafted to address the concerns of the nations opposing the move.
“I for one do not doubt the EU commitment to implement the promised trade discounts because its own political credibility is at stake. Nevertheless, the delays in its implementation have now started to cause anxiety to the industry,” said Ijaz Khokhar, chief coordinator and former chairman of the Pakistan Readymade Garments Manufacturers and Exporters Association (PRGMEA.
He said the early implementation of the tariff measures should boost mutual confidence and EU-Pakistan business and political relationship that the Union seeks to attain to further peace efforts in this region, especially Afghanistan.
He was not much impressed with an EU decision to partially redesign its trade preferences under its GSP+ (generalised system of preferences plus) on June 13 to facilitate Pakistan to apply for zero-duty to be charged on its exports to the bloc from 2014.
“GSP+ is something that remains in the realm of the future. Our priority is the present. We need something that would boost our exports to the EU from tomorrow if not today,” Khokhar argued, agreeing that the entry into GSP+ scheme would hugely benefit Pakistan’s value-added textile exports.
He is not over optimistic about Pakistan’s entry into the club of the GSP+ beneficiary countries easily. “If some countries are resisting the temporary tariff concessions to our export how would they let us have duty-free access to the European market?,” he contended.
Besides, he added, a big ‘if’ is attached to Pakistan’s ability to meet the Union’s human and labour rights, environment and governance standards. Islamabad must implement 27 international conventions on these issues if it wants trade discounts offered under GSP+. “We have yet to sign three of the said 27 conventions,” he claimed.
The redesigned GSP+ scheme increases the threshold of imports from countries applying for trade concessions under this arrangement from one per cent to two per cent to allow Pakistan, Ukraine and the Philippines, to be eligible and apply for zero-duty on their exports. It is, however, uncertain if Pakistan will be able to benefit from the temporary tariff concessions or the GSP+ scheme even if successfully meets the conditions for joining it due to energy shortages for the textile industry.
“If we want take advantage of the trade incentives offered by the EU we must invest heavily to expand our capacity, diversify our products and improve the quality of our exports,” argued a leading yarn producer from Lahore.
“The textile producers are ready to invest $5 billion in next five years if they ate assured of continuous supply of gas and electricity to run their factories,” he claimed.
“A big opportunity is likely to come our way if the temporary tariff waivers are implemented and Pakistan qualifies for the GSP+ incentives. No one would want to squander this opportunity. But we need firm government commitment for the supply of energy to operate our factories,” he said.