The latest statistics on trade between Pakistan and the European Union (EU) published last week included remarkably positive figures: The Pakistani exports to the EU in 2019 amounted to nearly €7.5 billion, 8.99% higher than in 2018. This comes a few days after the European Parliament in Brussels debated the trade preferences given by the EU to a number of countries, including Pakistan. The Government of Pakistan as well as Pakistan’s business community has been following this debate and the preparatory steps very carefully. Why? Because Pakistan is the single largest beneficiary of the EU’s GSP+ trade regime, which waives import duties on a wide range of products.
Trade is one of the cornerstones of the EU’s relationship with Pakistan. The EU supports Pakistan’s integration into the world economy and its sustainable economic development. The GSP scheme allows preferential market access for exports from developing countries to the EU. The GSP+, an even more advantageous version of the standard GSP scheme, offers duty-free access for nearly two-thirds of tariff lines. For Pakistan, 76% of its exports fall under this category. These preferences are tied to progress to be demonstrated in the implementation of 27 core international conventions on human and labour rights, environment protection and good governance.
Pakistan’s exports to the EU have grown by more than 64% since the GSP+ status was granted in 2014. Thanks to the GSP+, the European single market that comprises 27 countries is by far the biggest export destination for Pakistani products, absorbing about a third of Pakistan’s exports. This is about twice the exports to the US and about thrice the exports to China.
Pakistan’s export base is highly concentrated in textiles. In addition, if exports were more garments than textiles, the profit to the country would be greater. In addition, this is an export market that grew by 90% over the last year. Many more products could be exported to the EU under the GSP+ preferences. A more diverse export base, in particular including more value-added products, would allow Pakistan multiply the benefit of GSP+.
While the discussion in the European Parliament covered the volume and potential of the trade flows, a major focus was on the progress, or the lack thereof, the countries benefitting from EU trade preferences have made on human rights and good governance. It is, therefore, in the interest of the Pakistani business community and all other sectors of society to ensure that positive steps in this regard can be demonstrated in order to maintain the preferential market access to Europe.
The EU is continuously monitoring progress against the 27 conventions. The biennial report on GSP is only a moment of stocktaking and not the only moment at which the continuation or discontinuation of the trade preferences are discussed and decided on. After the report, a list of issues and specific priorities are shared with the GSP+ countries with the request to the governments to specifically report on them. If a reasonable doubt of a systematic and serious violation is observed with regard to non-implementation of the beneficiary country’s binding responsibility, the benefit could be withdrawn adopting a procedure for withdrawal as mentioned in Article 19 of the GSP regulation. Recently, Cambodia has lost its trade preferences owing to the denial of political rights, restrictive actions towards civil society and trade unions.
The European Union as a major development partner: Pakistan is one of the EU’s major development partners, with one of the largest programmes of aid in Asia. For 2014-2020 period, the grants provided for bilateral cooperation with Pakistan amounted to €603 million. EU-Pakistan cooperation priorities for 2014-20 programme period focus on rural development (50%), education and vocational training (35%) and good governance, rule of law and human rights.
The future of European engagement with Pakistan: While trade and development cooperation are the two cornerstones of the EU-Pakistan relations, the engagement is much broader. The Strategic Engagement Plan signed in 2019 sets out the new foundation for the EU-Pakistan relations and deepens cooperation in a number of areas ranging from peace and stability to democracy, security, rule of law, human rights, trade and sustainable development.
The EU is enhancing its partnership with a democratic and pluralistic Pakistan that respects human rights and benefits from its full economic potential by supporting sustainable and inclusive development for all its citizens. The EU will continue to work in partnership with Pakistan and to support the government and others from across the political leadership to promote greater prosperity in the country.
Published in The Express Tribune, March 17th, 2020.