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EU may stop GSP benefits for Pak textiles

E-Tex Staff - New Delhi

Pakistan is expected to be out of the drug window of the European Union’s generalised system of preferences (GSP) scheme with a World Trade Organisation (WTO) panel ruling against the provisions of the GSP. Though India will benefit from the ruling, Brussels is to determine whether or not Pakistani textile sector has graduated out of the scheme by issuing a notice for the purpose, according to commerce and textiles ministry officials.

They, however, aver that the exercise of issuing a notice to Islamabad will take some time, thereby delaying the benefits flowing from the panel’s recent ruling. Brussels had taken a ‘unilateral’ decision to extend duty-free concession to the Pakistani textile industry under the drug window of its three-year GSP scheme from January 1, 2002. The panel, however, had upheld New Delhi’s contention that the decision had adversely affected India’s textile exports to the Union. To support their viewpoint, officials said the utilisation of quotas by the Pakistani textile sector had increased in 2002 over 2001, from 72.43 per cent to 86.07 per cent (knitted shirts), from 21 per cent to 39.71 per cent (blouses) and from 18.69 per cent to 36.97 per cent (gent’s shirts). Officials also pointed out that the compounded annual growth of Pakistani textile exports to the EU had increased during 2002, while that of India had declined.

The textiles secretary Mr S B Mohapatra had, during bilateral talks with the EU representatives in Brussels last May, expressed serious concern at the Union’s generalised system of preferences scheme, pointing out that it had adversely affected India’s exports to the European Union vis-a-vis those from Pakistan. This was because of the special tariff arrangement extended to Pakistan under the scheme that aimed at combating drug production and trafficking, he had pointed out. Mr D K Nair, a WTO expert on textile matters and secretary general of Indian Cotton Mills Federation (ICMF), said if the GSP benefits for Pakistani exports were stopped, “the main advantage for India is that the competitiveness of its textile products in the Union will improve”. This is because Islamabad would have to pay the most-favoured-nation (import) duty at 12.5 per cent as New Delhi had been paying at present, he added. Mr Nair also pointed out that “Islamabad, however, continues to enjoy concessions under the bilateral agreement with Brussels which New Delhi does not have.” As per the agreement, Pakistan had agreed to lower the import duties on all its textile products across the board by five per cent from January 1, 2002 for three years till December 31, 2004 for obtaining duty-free entry into the EU market.