PET Exports – winsome, lose some

The latest episode in the exports of PET to the EU marks another victory for Pakistan as the WTO rejected the appeal and decided in Pakistan’s favour. To give a bit of background, EU’s countervailing duty of 5.1 percent on PET imports from Pakistan expired in 2015. The government of Pakistan took the case to WTO a few months before the expiry because traditionally EU does not renew trade restrictions of this sort if they have been challenged in the WTO. Pakistan won that ruling, which EU appealed and Pakistan won again this week.

So far so good. Before 2010 when Pakistan did not face countervailing duties from EU for PET, nearly 70 percent of Pakistan’s exports found a market there. Since then however, Pakistan shifted its focus to US which till the last fiscal year accounted for the bulk of the exports. In December last year however, US began an investigation regarding whether PET imports from Pakistan, among other countries, are causing an injury to US producers.

Unfortunately, but not unsurprisingly, this is not a battle Pakistan won. The US Department of Commerce’s preliminary determination was that PET from Pakistan, along with Brazil, Indonesia, Korea, and Taiwan is sold in America at less than fair value. Thus cash deposits will be collected at the border from importers of resin which in Pakistan’s case are at 7.75 percent, starting this month.

US’s neighbour has given friendlier treatment to Pakistan’s PET exports though. This year, Canada withdrew a preliminary anti-dumping duty of 5.5 percent imposed on Pakistan’s PET imports. However, the basis of the judgment was that the volume of subsidized goods originating from Pakistan was too negligible to materially impact local manufacturers. Last fiscal year Pakistan’s exports to Canada were $22.5 million. Thus, if exports to US were to be diverted to Canada, it is possible that the duties would be slapped back on.

So while Pakistan’s PET exporters have cause to celebrate the freedom to export to EU, they have lost the North American market.