Under ‘Generalised System of Preferences’, since 1971, the European Union has set rules ensuring that exporters from developing countries pay lower duties on some or all of what they sell to the EU. This gives them vital access to EU markets contributing to the growth of their economies.
The relevance of the GSP scheme to the current global scenario would become clearer in the words of EU Trade Commissioner, Karel De Gucht, “Global economic balances have shifted tremendously in the last decades. World tariffs are at an all-time low. If we grant tariff preferences in this competitive environment, those countries in greater need must reap the most benefits. Trade and development go hand in hand and tariff preferences are a small part of a wider agenda to help poorer economies scale up their presence in global markets.”
The overall GSP scheme has been reinforced through the ‘GSP plus incentive scheme’, by re-adjusting preferences and raising the impact. The three main variants of the scheme are the overall GSP scheme, the ‘GSP plus’ incentive scheme in respect of labour, human, environmental and good governance rights and rules, and the ‘Everything but Arms’ scheme for least developed countries.
In the context of Pakistan, to obtain duty concessions on exports, the European Union has proposed to soften a thorny condition that would enable Pakistan to qualify for the next GSP-plus scheme. Pakistan has an opportunity to utilise the facility of EU GSP plus scheme or the one-time trade concession package that the EU offered after Pakistan’s floods in 2010. The condition of less than 1 percent exports has been softened by EU, as now it has proposed to enhance this limit from 1 percent to 2 percent.
The EU GSP is a key instrument to help developing countries reduce poverty by generating revenue through international trade. Pakistan was excluded from the current GSP-plus scheme, which allows more than 7,000 products to enter the European market without duty and is effective since 2006, as less than one per cent exports to the European market was an important condition for availing the GSP-plus scheme.
One of the reasons for non-inclusion of Pakistan in the 2006 GSP plus scheme was that Pakistan’s exports to EU was more than one percent and it was also reluctant to adhere to UN conventions. Currently, Pakistan’s export share is close to 1.7 percent to 1.9 percent to EU countries. However, the enhancement in the limit to 2 percent exports will be subject to approval by the EU Parliament. And this could only be possible through effective strategies adopted by the Pakistani government.
Pakistan has engaged in negotiations with the international community to seek support over gaining the GSP-plus status. Britain has extended unwavering support to Pakistan, as the Foreign and Commonwealth Office Minister for Europe, David Lidington has assured that Britain would continue to plead Pakistan’s case in EU and beyond, to see the country integrated into global trade.
The Swedish Ambassador in Pakistan, Ulrika Sundberg, has also assured of Sweden’s support and the country is making all out efforts to ensure GSP-plus status for Pakistan in EU. These the efforts are backed by the willingness of Sweden’s businessmen to work with their counterparts in Pakistan and initiate joint ventures. Being an important member of European Union, Sweden offers huge untapped trade potential to Pakistan. There is a need for both the countries to identify more tradable products to expand mutual trade while focusing on value-addition.
Pakistan is known around the globe for its textile products, sports goods, surgical instruments, fresh fruits and vegetables, rice, carpets, leather madeups, fish and fish preparations, handicrafts, artificial jewellery, fancy furniture, footwear, hosiery, garments and other consumer items. Sweden believes that all these products from Pakistan still need to be properly introduced in European markets.
Pakistan is also tied in the most profitable Bilateral Investment Treaty (BIT) with Germany. Germany is Pakistan’s largest trading partner in Europe and importantly a strong supporter within the European Union for granting of GSP-Plus status to Pakistan. The ratification of an investment treaty with Germany in 2010 provides greater facilitation for German businesses, particularly small and medium sized companies, to benefit from the opportunities which the Pakistani economy offers, particularly in the power sector, renewable energy, environmental technologies, infrastructure and housing, healthcare, and information technology.
Another major European economy is Austria and this country too aims to support Pakistan’s access to the GSP-plus status at the next EU-Pakistan Summit. The Austrian ambassador, Axel Wech, has spoken encouragingly about the manner in which Pakistan is employing trade strategies. It can greatly benefit from Austria’s access to the European market and proximity to major EU economies