EU approves “watered-down” trade concessions to flood-hit Pakistan

Following internal negotiations, European Union (EU) governments on 11 November approved a package of trade concessions set to boost Pakistani imports to the Union in the wake of the flood disaster in June this year. However, the package originally proposed by the European Commission, the EU’s executive body, has been watered down.

The World Bank and the Asian Development Bank have put total losses associated with the damages from the floods at about US$9.7 billion. The original package would have yielded benefits worth US$133 million to Pakistan.

The European Council agreed to grant exclusively to Pakistan, from 1 January 2011, increased market access to the EU through an immediate and time-limited reduction of duties on key imports. The scheme allows duty-free access for 75 tariff lines for two years, with a third year extension conditional on an assessment.

Quotas have been introduced on sensitive tariff lines, such as some fabrics, towels, women’s jeans and socks. For these products, duty-free access will be suspended if imports grow by more than 20 percent. For other products, a safeguard mechanism will be put in place to counter any major import surges. The package excludes bed lines, the most important export from Pakistan, for which the country has an advantage over competitors such as China and India.

The textiles manufacturing industries in Pakistan have expressed disappointment. “The EU has diluted its tariff concessions, which will adversely undermine the scheme’s importance for Pakistan,” said Shahid Soorty, chairman of the Pakistan Denim Manufacturers and Exporters Association. Others have called the concessions “eyewash” aimed primarily at securing EU access to low-cost raw materials.

The package remains to be approved by the European Parliament, and be granted a waiver at the World Trade Organization (Bridges Trade Weekly News Digest, Vol. 14, No. 41, 24.11.10).