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Pakistan Considers Imposing Duties on India Yarn Imports

Contradicting the trend towards thawing commercial ties, the Pakistani government is considering imposing new duties on yarn imported from India.

Abbas Khan Afridi, Minister of Textile Industry, discussed the possibility at a recent meeting of the Faisalabad Chamber of Commerce and Industry. Afridi stressed the central importance of the textile industry to Pakistan, especially after the country won preferential trade status from the E.U. under its Generalized System of Preference Plus program (GSP).

Afridi stressed that Pakistan would not even consider an outright ban on Indian yarn imports, raising the possibility that the duties eventually imposed might be prohibitively steep. Some within the industry, including the Pakistan Hosiery Manufacturers and Exporters Association, have denounced the plan, going as far as to request that all fabric imports from India be allowed duty-free access to Pakistani markets.

There have been other sources of commercial tension between the two nations, recently. 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.”

However, despite some contention, 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.

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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.

Winning GSP Plus status with the E.U. is a historic victory for Pakistan, one that is widely expected to have an enormous impact on its textile sector. Currently, the E.U. is Pakistan’s primary destination for its textile exports. Overall, Pakistan’s 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 E.U., in particular. The textile industry accounts for more than 50 percent of the nation’s total exports. While 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.

Thirteen textile products are included on the list of those than 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.