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Can Pakistan’s Garment Sector Capitalize on GSP Plus?

New statistics suggest Pakistan’s garment sector is the only industry that’s benefiting from the country’s Generalized System of Preferences (GSP) Plus status.

According to trade data recently published by the European Commission, apparel exports to the 28-nation European Union in the first six months of the year grew to $1.463 billion, compared to $1.437 billion in the year-ago period.

Total exports to the EU, meanwhile, fell by more than 15 percent between January and August, from $5.012 billion to $4.237 billion—a far cry from its first year as part of the scheme, which saw exports swell by 20 percent.

Pakistan was granted access to GSP Plus in January 2014 and its exports to the EU will attract low or no duty for the next 10 years, as long as it continues to meet the 27 international covenants on human and labor rights, sustainable development and good governance that a country must comply with to be included.

So far, however, preferential access to the market has only helped the beleaguered garment sector.

“Yes, we are aware of falling exports,” a commerce ministry source recently told Dawn, blaming the outcome on the European recession but calling it a non-issue.

Textiles and clothing account for around 75 percent of Pakistan’s exports to the EU and around 80 percent of that number—a quarter of which includes home textiles—enter at a preferential tariff rate. This represents almost 20 percent of the country’s exports globally.

But industry insiders have argued that it will take more than GSP Plus to boost Pakistan’s shrinking exports.

Earlier this month, the finance ministry announced a 10 percent regulatory duty on imports of cotton yarn from India in a decision designed to protect the domestic sector. But Islamabad Chamber of Small Traders Patron Shahid Rasheed Butt has since said the value-added industry (which includes garments and home textiles) will suffer as the price of goods goes up to counter the rising cost of raw materials.