The GSP Plus challenge

The Pakistan government is required to submit progress on the 27 mandatory conventions to which Pakistan is a signatory to the European Union (EU) to remain eligible for the Generalized System of Preferences (GSP) Plus status, according to visiting Marc Vanheukelen, Director, the EU International Trade. Grant of GSP Plus status by the EU was extended in the aftermath of the then President Asif Ali Zardari’s request to the EU to extend trade concessions rather than aid to deal with the aftermath of the 2010 floods that devastated large parts of the country making 20 million homeless and wreaking havoc on property and infrastructure. But the real reason was that all countries, in the region, had this facility since India was dragging its feet on signing of a free trade agreement (FTA) with the EU.

Initially, some EU member countries as well as members of the international body dealing with global trade, including India, Brazil and Bangladesh, opposed the grant of GSP Plus status to Pakistan arguing that it would negatively impact on their exports to the EU. The then Punjab Governor, Chaudhry Ghulam Sarwar, with links to the European parliament also claimed that his interactions with EU parliamentarians to extend the GSP Plus status to Pakistan. In December 2013, the EU granted the GSP Plus status to Pakistan with 406 votes in favour and 186 against with its effectivity commencing on 1st January 2014 allowing 20 percent of our exports entering the EU at zero tariffs and another 70 percent at preferential rates. However, it was at the time acknowledged by the government of Pakistan that it would need to comply with all 27 conventions in two years time, ie, by January 1, 2016, if it is to retain the GSP Plus status – a time that is now fast approaching. This convention can be divided into four broad categories: human rights, governance, labour and environment.

The EU Ambassador Stefano Gatto recently expressed concern over the lifting of the moratorium on death penalty even though there is no specific convention with regard to this penalty. However, broadly speaking, it may fall under the category of human rights. But establishment of military courts may be a serious issue. Gatto did say that: “If you are a bit cynical and you look from outside, you would say that we gave GSP Plus to Pakistan to improve human rights standards and what they did now they have military courts and they have the death penalty back…It is difficult to argue that the restoration of the death penalty or more executions is a step in the right direction in the EU.” But when reminded that the two decisions were taken in light of the worsening terror-related incidents in the country, Gatto did acknowledge that implementing all 27 conventions is not an overnight task – “it can never be the case in Pakistan or elsewhere.”

However, Vanheulkelen categorically stated on the eve of the start of the meetings of his delegation with Pakistani officialdom that “we have to submit every two years country’s progress report on these (27 conventions) and if a country fails to make progress on agreed standards it can even face suspension of the GSP benefit.” In this context, it is relevant to note that Sri Lanka’s GSP Plus status was withdrawn in 2010 for failing to meet all 27 conventions. Pakistan too was given market access by the EU, in the aftermath of 9/11, under a bilateral treaty of anti-drug enforcement. However, the market access and zero-duty facility was withdrawn when PIA decided to purchase Boeing 777 aircraft instead of Airbus 380 planes.

The Minister for Commerce Khurram Dastgir when asked has stated that the GSP Plus was extended to Pakistan on a vulnerability criteria as our exports to the EU are less than 2 percent; however, he then added that Commerce Ministry is in discussions with provinces and other ministries to fulfil the GSP requirements as none of the conventions fall under the control of his ministry. There is, of course, still time, around seven and a half months and one would hope that by that time progress in dealing with terrorism would enable the government to meet the conventions relating to human rights.

Gatto stated: “We want to see strengthening of civilian courts in the civilian system rather than giving the role to military courts as there are less chances of transparency.” It is extremely unfortunate that to date there appears to be little focus on strengthening civilian courts or the prevailing weak prosecution system that is the need of the hour. In addition, one hears of instances where lawyers physically abuse the lower judiciary with no legal repercussions. This too must change.

Given the state of Pakistan’s exports today a withdrawal of the GSP Plus status would dampen our exports as the major contributor to keeping exports from declining is our exports to the EU given that our exports to the rest of the world are declining due to law and order problems, energy shortfalls and according to exporters, a rupee value that makes our exports uncompetitive. To conclude, it is imperative to take appropriate measures today, whether they be on the diplomatic front or through implementation of all 27 conventions, rather than risk the possibility of a withdrawal of GSP Plus status. Insofar as a 10 percent rise in textile exports to the EU is concerned, it is basically reflective of true pricing of textile products as there is no more need to under-invoice. One can gauge it from the fall in exports to Dubai – the nerve-centre where export papers used to be changed.