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India Eases Restrictions on Pakistani Textile Products

The Indian government announced it is prepared to eliminate restrictions on the importation of textile products from Pakistan, a move that bouyed investor confidence in both countries.

Maftah Ismael, assistant to Indian Prime Minister Nawaz Sharif, said India will ease the barriers on more than 160 Pakistani products, including many items sold in Pakistan’s many local markets. He predicted that the decision would result in the tripling of exports from Pakistan to India.

The news of the ban is welcome counterpoint to gathering tensions between the two nations, especially regarding trade, in the last several months. While Pakistan has been granted duty free access to European markets under the Generalized System of Preference Plus (GSP), effective since January 1, 2014, India “graduated” out of its GSP status and has vigorously lobbied for its renewal.

Also, on February 18, Pakistan President Mamnoon Hussain visited China to discuss the opening of a controversial economic corridor between the two nations, traversing Pakistan-occupied Kashmir territory. The multimillion dollar project has stoked controversy in India, given its own proprietary claims on the region. A spokesperson for the Chinese Foreign Ministry, Hua Chunying, acknowledged the tension between India and Pakistan on this score. She said, “On India’s concerns, I understand it is about the Kashmir issue. China’s position on this issue is clear cut. The Kashmir issue is a legacy issue from history. We hope the two sides (India and Pakistan) will follow the spirit of peace, appropriately deal with (the issue through) dialogue and consultation.”

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Despite tensions, Pakistan and India are increasing the collaboration between their garment industries. According to Arshad Aziz, chairman of the Pakistan Readymade Garment Manufacturers and Exporters Association (PRGMEA), Pakistan expects to generate $100 million in export orders from Indian buyers at an upcoming trade conference. The trade show, “Made In Pakistan Expo 2014,” has already booked more than forty-five stalls. Indian consumers often enthusiastically favor Pakistani garments, particularly womenswear. The conference is designed to facilitate both business-to-client and business-to-business meetings, putting Pakistani manufacturers together with Indian importers. The show will feature approximately 120 exhibitors in total.

While India continues to express consternation that it lost its GSP status while Pakistan gained it, it remains in the country’s best interest to take advantage of Pakistan’s duty free access to E.U. markets. While the new GSP status doesn’t exclusively impact Pakistan’s textile industry, it should be among the biggest beneficiaries. Bilal Qamar, an analyst at JS Research in Karachi, said, “The domestic textile industry is likely to take the benefit of adding value itself and increase direct exports to the E.U. after GSP Plus status.” More than 20 percent of Pakistan’s exports will enter the E.U. market’s tariff-free, and more than 70 percent will enjoy dramatically reduced tariffs.

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