MUSHTAQ GHUMMAN

ISLAMABAD: Ministry of Foreign Affairs and Ministry of Commerce and Textile are said to have divergent views on future of Generalized System of Preferences plus (GSP +) by the European Union (EU) beyond 2018, well-informed sources told Business Recorder.

Minister for Commerce and Textile, Pervaiz Malik and Secretary Commerce Younus Dagha recently undertook visits to different European countries aimed at seeking their support at the time of second review due in January 2018.

The Commerce Minister visited Switzerland, Germany and Belgium whereas Secretary Commerce undertook visits to France, Spain and Italy where they explained Pakistan’s achievements with respect to 27 UN Conventions.

Ministry of Foreign Affairs, sources said, fears that the EU may withdraw or suspend GSP plus status for Pakistan due to poor implementation of UN Conventions and other issues whereas the recent visit of Commerce Ministry’s team maintains that there is no such threat to the GSP plus as was feared by the Foreign Ministry.

According to sources, the key trade concerns of the EU in Pakistan are as follows: (i) SRO 1125 violation of national treatment, discriminatory imposition of sales tax on imported products;(ii) regulatory duty of 25 per cent on powdered milk;(iii) discriminatory customs valuation of European cars vis-à-vis cars of Asian origin;(iv) discrimination treatment against international pharmaceutical companies vis-à-vis domestic industry;(iv) weak enforcement of intellectual property rights;(v) restrictions on import of meat from EU;(vi) implementation of conventions and other issues;(vi) progress on readmission dialogue with EU;(vii) agreement on Human Rights assistance and ;(viii) recommendations of EU’s GSP plus assessment team October, 2016.

A detailed discussion on trade and other issues was held on October 9-11, 2017 in Brussels which remained positive.

As a result of successful vote by the European Parliament in December, 2013 duty free access was granted to Pakistani products in 28 members states in the European Union under its “ special incentive arrangement for good governance and sustainable development” for 2014-2023 also known as GSP plus. These concessions took effect from January 1, 2014. These concessions are granted to those beneficiary countries who undertake to implement 27 UN Conventions mandatory for GSP plus. The GSP regulation requires EU Parliament to undertake review of its GSP scheme every two years. The first review was carried out by the EU Parliament in 2016 which noted legal and institutional framework of Pakistan as a beneficiary country for implementing 27 Conventions.

The second review which is also a mid-term review of the scheme will be undertaken in January 2018. The focus during this review shall be on the tangible progress undertaken by Pakistan in implementing the commitments entailed in the conventions pertaining to human rights, labour rights, climate change, narcotics and corruption.

The duty free access has made Pakistan’s products more competitive in world’s most lucrative market. In 2016, Pakistan’s exports to the EU amounted to 33 per cent of our global exports. Pakistan’s exports to the EU have increased from Euro 4.54 billion in 2013 to Euro 6.29 billion in 2016. This arrangement has also enhanced the market share of Pakistani products in all categories.

During a meeting with Pakistan Mission in Belgium, the European side communicated that holding of a Pak-EU summit is contingent upon resolution of the following two issues between Pakistan and the EU. The Secretaries of the European Union’s President and European Council have taken very strong position on the two following issues: (i) agreement on readmission of illegal immigrants and (ii) acceptance of human rights assistance offered by the EU to Pakistan.

There is an understanding among European institutions that there was a gap between legislation and on ground implementation pertaining to the human rights regime in Pakistan.

According to European Commission a large share of Pakistan’s export to the EU is eligible for GSP+ preferences, but the country does not fully utilise the preferences. The utilisation rate has fluctuated under the review period. In 2016, the average utilisation rate was 95.75 per cent, meaning that Euro 5.509 billion out of the Euro 5.753 billion eligible exports were exported with preferences. Figures show a significant decrease in the utilisation rate in 2014 when Pakistan was granted GSP+ status. Compared to 2013, the utilisation rate dropped by almost 25 percentage points. The European Commission said that low investment in Pakistan can be attributed to macroeconomic instability, security concerns, energy deficits, poor infrastructure development in some regions, low skilled labour, comparatively high labour costs, a difficult business environment, arbitrary administration of laws and regulations – including on land purchasing and registration – and administrative resistance to open up to investments.