Pakistan’s Relations with European Union (EU)

Introduction

One-day conference on “Pakistan’s Relations with European Union (EU)” was organized by Islamabad Policy Research Institute (IPRI) on March 5, 2015 at Marriot Hotel, Islamabad. The conference comprised of one working session in addition to inaugural and concluding sessions. Four presentations were made by eminent scholars that covered themes, i.e. “Pakistan-EU Strategic Relations: Challenges and Prospects”, “Pakistan-EU Trade Relations and Impact of GSP plus Status on Pakistan”, “Pakistan-NATO Relations”, and “Private Sector’s Point of View on Pakistan-EU Relations”.

Concept Note

Pakistan-EU relations date back to 1974, but it was in 2004 that the tone was set for enhanced cooperation with the signing of the “Cooperation Agreement on Partnership and Development.” The EU-Pakistan ad hoc Summits were held in 2009, 2010 and in March 2012, in which, a new political framework called the 5-year Engagement Plan was endorsed by both sides. The plan provided a framework of cooperation in areas of counter terrorism, trade, development, energy, human rights and democracy.

In pursuance of the decision taken at the first Pakistan-EU Summit held in 2009, the first Pakistan-EU Strategic Dialogue was held in Islamabad in 2012. Its latest session was held in Brussels which was led by the Advisor to the Prime Minister on National Security and Foreign Affairs, Mr. Sartaj Aziz and the President of EU. Prior to the Strategic Dialogue, Pakistan was granted the GSP plus status under EU Generalised Schemes of Preferences on January 1, 2014. Under this scheme Pakistan’s exports to the EU will get zero percent tariff on exports to EU countries. It is generally believed that Pakistan will immensely benefit from this status. To maintain GSP plus status, Pakistan has to ratify and effectively implement 27 core international conventions on human and labour rights, environmental protection and good governance.

The focus of EU activities in Pakistan in the past had remained on poverty reduction through rural development and natural resource management, education and human resource development particularly in Khyber Pakhtunkhawa (KPK) and Balochistan. Furthermore, EU had provided humanitarian assistance to flood victims in 2010, 2011 and 2012.

EU is Pakistan’s most important and largest trading partner accounting for 21.2% of Pakistan’s total exports and 16% of its total imports. Pakistan’s exports to the EU are dominated by textiles and clothing as well as leather products while Pakistan’s imports from the EU mainly comprise mechanical and electrical machinery as well as chemical and pharmaceutical products. The EU and Pakistan have set up a sub-group on trade under the auspices of the EU-Pakistan Joint Commission to promote the development of two way trade through discussions on the trade policy development and dealing with individual market access issues. The volume of trade between Pakistan and EU has reached US$10 billion.

Pakistan has also developed strategic relationship with major EU States such as UK and France. UK is cooperating with Pakistan’s police force on counter-terrorism including operational cooperation and capacity building. Likewise, Pakistan and France are cooperating in the field of defence and our Navy and Air Force have been the beneficiaries of the French defence equipment.

The institutional structure of EU limits enhanced political and strategic relations with non-EU member states but EU can play a role within its institutional structure and can initiate cooperation in several other areas to further expand existing trade relations. It can add more content aimed at improving health facilities and education in Pakistan and can also enhance investment in infrastructure development for sustained economic growth.

 

Proceedings of the Conference

Inaugural Session

Welcome Address

In his welcome address, Ambassador Sohail Amin, President IPRI, greeted the chief guest H.E Mr. Lars-Gunnar WIGEMARK, Ambassador of the European Union (EU) Delegation to Pakistan, chair of the session Ambassador Fauzia Nasreen, speakers and audience of the conference. He said the relations between Pakistan-EU dated back to 1974. However, the “Cooperation Agreement on Partnership and Development” signed in December 2004 was initiated to strengthen the relations. He informed that the “EU-Pakistan ad hoc Summits” were held in 2009, 2010 and in March 2012, in which, a new political framework, called the “5-year Engagement Plan”, was endorsed by both sides. The plan provided a framework of cooperation in areas of counter terrorism, trade, development, energy, human rights and democracy. He informed that EU was contributing 600 million Euros as assistance to Pakistan since 2010. Moreover, according to EU plan of action from 2014 to 2020, EU would focus on good governance, human rights, rule of law, education and rural development. He said that granting of GSP plus status to Pakistan by EU had boosted bilateral relations. Therefore, the trade between Pakistan and EU crossed 10 billion US$ mark. He hoped that new areas would be identified for future cooperation between Pakistan and EU.

Session-I

Ambassador (R) Munawar Saeed Bhatti, former Ambassador of Pakistan to Belgium, delivered a talk on “Pakistan-EU Strategic Relations: Challenges and Prospects”. He gave an overview of EU’s creation, regional grouping’s journey towards prosperity and the Pakistan-EU ties. It was brought out that the devastating impact of World War I and II, compelled the people of Europe to think over their differences and move towards regional unity. The first step in this direction was the signing of “Treaty of Paris” in 1951. The Treaty was signed by six European countries, i.e. France, Germany, Italy, Belgium, Luxembourg and Netherland. Later, the Treaties of Rome were concluded and European Economic Community (EEC) and the European Atomic Energy Community (EAEC) were established. While discussing the current status of EU, he informed that the EU was not only the world’s largest economy but was also the largest donor; over half of the official development aid (56 billion Euros) came from the EU and its member countries.

On Pakistan-EU relations, it was stated that the cooperation was in areas of trade, development aid, humanitarian assistance and counter terrorism. He informed: “EU is both the largest donor and the largest trading partner of Pakistan but so far Pakistan is not a strategic partner of EU”. During 2007-2013, assistance from EU and its member states amounted to Euro 2.458 billion. Pakistan had also been granted the GSP Plus status by the European Parliament. In 2014, Pakistani exports to EU stood at 4.656 billion Euros. So far, two rounds of Pakistan-EU strategic dialogue had been held (first in June 2012 in Islamabad and second in Brussels in March 2014). European Parliament also had passed a resolution on “Pakistan’s regional role and political relations”. Recently, members of the South Asia delegation of the European Parliament visited Pakistan from 16-19 February 2015. Pakistan-EU fourth round of bilateral talks on counter terrorism was also held on 24 February 2015.

As regards the pace of progress with EU, it was opined: “the factors like Pakistan’s image as an extremist state, suppression of women and minorities in the country, sectarianism, nuclear proliferation and the issues of illegal immigration/smuggling have maligned Pakistan’s image; European investors are reluctant to invest in Pakistan”. It was further pointed out that to allay the misperceptions about Pakistan and to re-build the confidence of the foreign investor, Pakistan needed to speed up its economic growth and an active participation from the Pakistani business community was required. The speaker also underscored that Pakistan’s strategic location, natural resources and the young labour force could be employed to attract the foreign investors. Another area in which Pakistan lagged behind was the technological advancements. It was reiterated: “Pakistan does not have any big brand name to its credit like Samsung, TATA, Nano in the global market”. It was also suggested that Pakistan could enter into arrangements with EU universities for joint research/programmes and technological exchange. Lastly, it was concluded that these steps could earn Pakistan the status of a strategic partner with the EU.

Prof. Dr. Naheed Zia Khan, Dean, Faculty of Arts and Social Sciences, Fatima Jinnah Women University, Rawalpindi,gave her presentation on “Pakistan-EU Trade Relations and Impact of GSP Plus Status on Pakistan”. She told the background of Generalised System Preference (GSP) concept and told that in 1968, United Nations Conference on Trade and Development (UNCTAD) adopted GSP in order to facilitate developing countries. There were two types of GSP, i.e. GSP standard and GSP plus. GSP standard provided preferences on various trade items while GSP plus was more beneficial and it contained more concessions. She informed that other developed countries such as the US, Russia, Australia, Canada, Japan, Norway and Switzerland were also offering GSP plus status to developing countries. GSP plus offered additional duty free imports. In response, EU member countries asked for good governance and sustainable development from developing countries. EU granted GSP plus status to Pakistan for three years. Pakistan would enjoy zero percent tariffs on 20 percent exports to EU through GSP. Moreover, 70 percent Pakistani products would have preferential access to European markets. Pakistan had 74 high potential exporting products of 11 sectors for EU. GSP is a governing system which provided unilateral market access which should not to be import sensitive. However, agriculture sector is largely considered as import sensitive in various European countries. Unfortunately, Pakistan had confined its focus on textile sector which covered 74 percent exports to EU. Moreover, Pakistan would also compete with nine other countries which were enjoying GSP plus status from EU particularly from Georgia, Peru and Bolivia. The economic partnership agreements and free trade agreements would also increase the level of competition for Pakistan. She informed that textile exports to EU were 1,569.2 million dollars in 2013 and 1,796.7 million dollars in 2014. Moreover, it was expected that in 2015 these exports would increase upto 2,057.2 million dollars and 2,355.5 million dollars in 2016.

She suggested that Pakistan should be pragmatic and not idealist in its policies. She opined that GSP plus status would not benefit Pakistan as it had been projected on media. She informed that India had recently secured “competitive” status in textile sector while China had also acquired the same status. Moreover, China and India had cost advantage in textile sector; therefore, GSP plus status would only neutralize the cost advantage of China and India. Both countries had lower unit production price. Moreover, both countries had trust advantage which was known as “customer’s relationship”. Therefore, it was important for Pakistan’s industrialists to revisit their relationship with European customers. Moreover, GSP plus status had put some responsibilities on Pakistan. She recommended that Pakistan should utilize its full capacity. She informed that Pakistani industry lags behind in innovations and inventions. Pakistani industry did not cooperate with academics for new innovations. Private sector should work on research and development. Energy shortage, law and order situation and bad governance further increase the problems for local industry. Pakistan needed good governance in order to deal with internal inefficiencies. There should be linkage between industry, public sector and academia in order to find new pathways to increase efficiencies.

Dr. Zafar Nawaz Jaspal, Director, School of Politics and International Relations (SPIR), QAU, Islamabad, gave a talk on “Pakistan-NATO relations”. Pakistan-NATO alliance was seen to have positive impact on Pakistan-EU relations. To support the argument, NATO’s importance was seen in the European context. It was stated that NATO addressed the anarchy among the European countries in post-World War I and II. Later, during the Cold War era, NATO’s prime responsibility was defence against the Russian expansion. In post-Cold War period, transnational cooperation and regional defence became the priority of NATO. In the aftermath of 9/11, NATO troops remained deployed in Afghanistan as part of US Coalition forces. Therefore, the organization had never lost its significance; rather, its roles had been modified according to the changing international circumstances.

On Pakistan-NATO relations, it was reiterated that Pakistan Armed Forces had attended NATO short courses as well as NATO Defence College, Rome. To further institutionalize this partnership with NATO, cooperation in arms control, civil emergency and counter terrorism could be explored. As regards, regional stability, it was opined that NATO still was a stakeholder in Afghanistan. Recently, in Doha, NATO Defence College organized a conference on Afghanistan in post-ISAF era. During the conference, Pakistan’s significance was realized for Afghan/regional peace. Therefore, this could be an important area of cooperation between Pakistan and Afghanistan. Another area of cooperation identified was radicalism/extremism. In view of the transnational threat emanating from IS, extremism continues to be a source of concern for Europe. The European Muslims with Pakistani parentage are increasingly heading towards extremism. This has adversely ramified Pakistan’s image in Europe. Through the NATO platform, it could be conveyed to the Europeans that Pakistan should not be blamed for the rogue behaviour of individuals brought up in a European society.

Kamal Monoo, Member, Board of Governors (BOGs), IPRI,gave private sector’s point of view on Pakistan-EU relations. He said that EU was a very vibrant trading partner of Pakistan. GSP plus status was welcomed by Pakistani private sector. The total trade between Pakistan and EU was bordering around 10 billion dollars mark. He informed that after granting GSP plus status to Pakistan, one billion Euro exports increased to Europe which created 100,000 jobs and 1.2 million economic opportunities in private sector. Therefore, the goals of poverty alleviation and sustainable development had been achieved by Pakistan. He said that European concerns such as transparency and utilization of aid and assistance, freedom of speech, human rights were also the concern of Pakistan. He also highlighted private sector’s concerns which needed to be addressed such as security situation, energy shortage and inflation. He said that some European companies left Pakistan due to various reasons, which was a joint concern for Pakistan and EU. Moreover, Pakistan needed to undertake extra measures to address European concerns in order to increase trade relations. He suggested that Pakistan should ratify 27 conventions in order to extend the GSP plus status in 2016. In this context, the coordination among various ministries would be required. He informed that Euro was devaluing due to financial crisis which favoured Pakistani exports. He suggested that Pakistan needed to broaden the scope of exports to EU. Moreover, he proposed that there should be a joint platform of Pakistan and EU in order to address such concerns. He hoped that aims and objectives of Pakistan and EU were identical; hence there would be increase in cooperation between Pakistan and EU in years to come.

 

Concluding Session

H.E. Mr. Lars-Gunnar Wigemark, Ambassador of the EU Delegation to Pakistan shared the European perspective on Pakistan-EU ties. He said, “EU being US centric views Pakistan through the US prism”. Seen in the historical context, Pakistan’s trade relations with Europe date back to the 1960s, when EU was still in the evolving phase. To portray the correct picture of Pakistan in the Europeans circles, there was a need to enhance ties with EU. It was reiterated that better understanding of Pakistan-EU ties could be fruitful in this context. The Ambassador supported the Pakistani institutions teaching Europe related courses. In this regard, the Area Study Centre of Europe in the University of Karachi was referred. Commenting on EU’s trade policies, the Ambassador talked about the GSP plus arrangement, in which zero tariff was offered over 91 percent of products. He said that the EU had GSP plus agreement with 13 countries. The GSP plus was valid for 10 years and after every two years, the arrangement was reviewed. He viewed the trade incentive as an opportunity for the developing countries to not only improve ties with the EU, but also to strengthen the economy. In the context of Pakistan, it was pointed out that Pakistan was also a recipient of GSP plus, and the country should utilize it to its maximum. It was proposed that Pakistan needed to diversify its trade products from raw material to finished goods. A pro-active role from the business community was the need of the hour. Besides, vocational training centres were required to channelize the youth of the country. It was also proposed to institutionalize a dialogue with EU, to regularize/check the movement of workers from Pakistan to Europe.

EU’s developmental work in Pakistan was discussed. It was reiterated that the prime areas identified by the EU were KPK, FATA, Balochistan and the Southern Punjab. The rationale behind this was poor development of these areas. It was opined that the populace with no job opportunities were easily exploited by the extremist factions. Therefore, through developmental work the area’s vulnerability to terrorism would be curtailed. The Ambassador also pointed towards the governance issues in the country. He said human laws should be strengthened. Business companies should treat their workers well and pay them timely. He further added that EU supported the democratic process in the country, but still the irregularities in the electoral process and governance issues were a source of concern.

Lastly, EU’s criterion for induction of new members was highlighted. It was underscored that trade, environment, governance and human rights were the determining factors for a state’s entry into the EU.

 

Vote of Thanks: President IPRI, in his vote of thanks, said that Pakistan and EU had various points of convergence, which would increment relations between Pakistan and EU in future. It was a renewal of commitment to enhance relations between Pakistan and EU. He informed that conference recommendations would be shared with the policy making circles of the government. At the end, he thanked chairperson and the panelists of the conference for enlightening the audience on Pakistan-EU relations.

 

Recommendations

 

Following recommendations were made by the speakers/Chair/Chief Guest/Audience during the deliberations of the conference:

 

• The participants of the conference agreed that Pakistan attaches great importance to EU and the relationship has traditionally been more trade oriented. There is a need to further increase political, economic and strategic cooperation. GSP plus status given to Pakistan is an important landmark in boosting trade relations between the EU and Pakistan.
• In order to continue getting benefits from GSP plus status Pakistan should focus on its commitments towards rule of law, transparency, encourage participation, accountability and sustainability. Pakistan should also focus on meeting the requirements relating to labour laws and environmental conventions.
• EU is a model for regional cooperation, integration and peaceful neighbourhood. In order to promote regional cooperation, peace and stability, South Asia may follow the EU model.
• The trade volume of Pakistan and EU is not very impressive, as compared to India. Pakistan’s exports have captured only 0.33% of EU market. The business community of Pakistan needs to explore the European market and exploit it to its maximum potential.
• There are issues of illegal immigrations to Europe; Pakistan and EU should work out an institutionalized solution to the problem. This will help in mitigating adverse effects of anti-immigration policies of some European countries.
• China-Pakistan Economic Corridor holds the potential to transform Pakistan into a North-South bridge. The country’s strategic location can connect the EU to China and beyond for trade and commerce.
• Pakistan is just a traditional partner of the EU whereas India is a strategic partner of the EU. There is a need for Pakistan to take measures and initiate an institutional process to develop strategic partnership with the EU. Pakistan’s strategic partnership with the EU will help in promoting regional stability and countering other non-traditional security challenges, such as extremism and terrorism.
• For enhancing political understanding, there is a need for frequent interaction between the parliamentarians of Pakistan and EU.
• The image perception plays its role in international relations. Pakistan must promote its soft and peaceful image to attract investment and trade opportunities from the external world. The National Action Plan to counter terrorism is a right step in this direction.
• EU is much advanced in science and technology. There is a need for joint academic and research programmes.
• Currently more than 75% of Pakistan’s export to EU are textile oriented and leather product. To get maximum benefit from the EU market, the country needs to diversify its exports to the EU.
• So far, Pakistan does not have globally well-known trade market which can convince the international business community about innovation and quality of Pakistani products. The government of Pakistan needs to encourage and support business houses to invest and develop trust worthy trade markets.
• Pakistan has a large youth bulge and industrial labour force which is likely to expand in the future. This demographic force, if trained properly, will be an attraction to EU. Pakistan needs to train its labour force and promote vocational training in the country which meets European requirements.
• There is a need for holding single country exhibitions in EU member states to raise awareness about Pakistan’s traditional and innovative products.
• Energy shortage and its high cost are increasing the hardships of industrialists and affecting exports. The government must focus on overcoming the energy crisis in the country.
• Our judicial system needs to be reformed especially to handle civil cases on priority basis.
• Pakistan and NATO can cooperate in the countering transnational threats such as cyber terrorism and radicalization, etc.
• To cement Pakistan–EU relations, Pakistan should continue to maintain its partnership with NATO for the sake of Afghanistan’s stability and combating the menace of transnational terrorism.
• Pakistan should work on improving the quality standards of its exports to the EU.
• The exporters and producers should be sensitized on the strategic significance of the EU market and they should be facilitated to meet the quality standards acceptable in the EU market.
• Pakistan should make concrete efforts to implement all the conventions to which the country is a signatory and EU expects her to honour them all.
• Several EU private companies have left Pakistan due to various security challenges. There is a need to create a conducive environment for investors in the country.
• A joint platform comprising representatives of the government of Pakistan, EU delegation in Pakistan and private sector should meet periodically to assess the progress with regard to GSP plus status prior to its review to be undertaken in 2016.
• EU should show flexibility on its own standards of human rights when it comes to the implementation of the National Action Plan by Pakistan for which special measures have to be taken to meet with special circumstances.