Grabbing the GSP plus Opportunity

 

GSP plus The International Trade Committee of the European Union (EU) Parliament has approved the GSP plus status for Pakistan. The decision was passed after voting. This will now go and formally be granted by the European Parliament’s session that is to be held in December 10. Under the GSP plus scheme 75 Pakistani products will have a duty free access to EU market. However, any product cannot exceed the 6 percent ceiling import of EU.

Earlier on concessionary access to Pakistani products was granted by EU in 2002 for three years. Since then Pakistan has been pursuing for similar concessions. Pakistan applied for the GSP plus status in March this year. If endorsed by the EU parliament, it will give the much-needed boost to country’s exports. It has been granted to Bangladesh and India; latter has now transcended from a GSP plus to a GSP status. Bangladesh textile exports have benefited immensely from the scheme, to the disadvantage of Pakistani textile exporters. Pakistan had to pay substantial duty for entry into EU market, 3.2 percent for cotton yarn to 9.6 percent for textile made-ups while the textile products from Bangladesh did not have to pay any customs. Pakistani products will now be at par with textile products from Bangladesh and Sri Lanka.

GSP stands for generalized system of preference. It gives exemption from general rules of World Trade Organization (WTO) particularly its principle of Most Favoured Nation (MFN) that obliges a WTO member state to give equal treatment to imports of other member states, i.e., not worse than the ones granted to its MFN state. The GSP system was reached at the United Nations Conference on Trade and Development (UNCTAD). The GSP is granted to least developing countries by the developed countries. The GSP plus, otherwise called “Special incentive arrangement for sustainable development and good governance”, is a special arrangement under GSP. The difference between the two is that while GSP reduces tariffs substantially, a GSP plus gives a complete waiver on certain trade products that are specified by the agreement. The GSP plus beneficiary states have to ratify and implement international conventions on human and labor rights, good governance and environment. Another special arrangement under the GSP is Everything But Arms (EBA) that provides duty and quota free access to all products except arms.

The GSP Plus status will become operational from January 1, 2014 for the next ten years. This development has been hailed by the value-added textile sector of Pakistan. Pakistani’s textile exports has a room to grow three times under the GSP plus, estimates put a surge of $6-8 billion through textile exports to EU and annual boost of $2 billion. However, with this opportunity come great responsibilities. GSP Plus is subject to implementation and strict adherence to all twenty-seven conventions on human rights, good governance, labour standards and environment. It is important as for some countries the GSP system has been suspended temporarily such as Myanmar and Belarus. Non-compliance with administrative cooperation requirements may also prove deleterious to the beneficiary states.

Pakistan has to travel miles in order to meet the GSP plus criterion. Pakistan will have to strictly enforce environment protection laws, adhere to human rights conventions and maintain international labour standards. Of course this needs close cooperation of private sector with the government. The government needs to closely monitor implementation of these conventions and must not tolerate any violation. The government must conduct awareness campaigns so as to educate industry to conform to international standards on environment and labour rights.

Exports-oriented industry will generate employment and economic activity in general. While there is huge potential for exports growth, the question is whether we are prepared to cope up with growing demand of our products? The economy suffers grave challenges such as energy shortage, poor law and order situation and high credit costs. The gas supply to industry will be suspended for the next three months in Punjab. In such energy-parched scenario, how will industry work? It all comes back to issue of governance which is in dire need of improvement in Pakistan. Economic growth cannot be made in isolation with other spheres of state and society. It is all interrelated. Real progress can only be made if it is carefully planned out, diligently pursued in a cohesive manner and effectively enforced. If the GSP plus opportunity has come our way, we need to grab it with both hands and not let it slip by.

 

Maria Syed

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Maria Syed is a researcher at IPRI

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