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EU Grants Pakistan GSP-Plus Status

Pakistan has been granted duty-free access to European markets under the Generalized System of Preference Plus (GSP), effective January 1 2014.

The new status for Pakistan was approved by a majority vote by the European Union (EU) and is expected to have an sizable impact on its exports, affecting more than 3,500 different products.

Currently, the EU is Pakistan’s primary destination for its textile exports. As it stands, overall textile exports topped $13.06 billion last fiscal year, including $2.7 billion worth of yarn and $2.5 billion of fabric to Bangladesh, specifically. Pakistan’s exports have grown by approximately 12.5% per year, with a growth of 10.3% to the EU, in particular. The textile industry accounts for more than 50 percent of the nation’s total exports. While the forecasts regarding the full reverberations of the new status for Pakistan vary widely, many predict growth by as much as 100 percent over the next four years.

Still, Pakistan maintains a keen eye on the prize of GSP status with the US, as well. Mahmood has been forcefully trying to convince the US to grant it duty-free access to its markets as part of an overarching free trade agreement. The US is Pakistan’s biggest trading partner overall, importing nearly $4 billion worth of its goods to it per year, including textiles. Mehmood believes that number could quickly rise as high as $6 billion if Pakistan had increased access to US markets as well as the friendly transfer of some technologies.

Mahmood argues that a free trade agreement with Pakistan would redound to the benefit of the US, given the quality and low cost of its textiles. Pakistan aims to position itself as a major exporter in light of the rising costs of China and the political riskiness of Bangladesh.

Nevertheless, there are reasons to believe that the US is reluctant to commit to such an arrangement with Pakistan. This month Pakistani Prime Minister Nawaz Sharif visited the US for three days, advocating, among other things, closer hewn bilateral ties. Despite an aggressive sales pitch, the White House demurred, preferring to remain ambiguous regarding Pakistan’s prospects. Nothing was definitively concluded and US Trade Representative Michael Froman invited his Pakistani counterpart to meet with him in Washington and further discuss future plans. All that was agreed upon was a continuation of the discussion over the next five years, and the staging of a third US-Pakistan Economic Opportunities Conference next year.

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Many interpreted the inconclusiveness of the agreement as a failure of commitment on the US’s part to certify a still largely informal partnership, especially regarding trade issues. Many noticed that Sharif made no mention of future GSP status at the press conference before his departure back to Pakistan, a discouraging sign for those recommending stronger ties.

Thirteen textile products are included on the list of those than can be exported duty-free to the  the 27 members of the EU, accountable for $231 million worth of goods last year. Some are predicting this will increase Pakistan’s EU exports by $1 billion.