Diplomatic relations between Pakistan and the European Union relations was established in 1962. The first cooperation was initiated in 1976, followed by a formal Commercial Cooperation Agreement in 1986 and Cooperation Agreement, 2004 which plays a crucial role in closer relationship in promoting trade and investment. Pakistan-EU bilateral trade relations are governed by the Cooperation Agreement from 2004. Enhancing bilateral trade and investment is also part of the EU-Pakistan 5-year Engagement Plan from 2012. Pakistan is a major beneficiary of the trading opportunities offered by the EU Generalized Scheme of Preferences (GSP). From 1 January 2014.
The Generalized System of Preferences (GSP) is a formal system of exemption from the more general rules of the World Trade Organisation (WTO), (formerly GATT). Specifically, it's a system of exemption from the most favoured nation principle (MFN) that obliges WTO member countries to treat the imports of all other WTO member countries no worse than they treat the imports of their "most favoured" trading partner. In essence, MFN requires WTO member countries to treat imports coming from all other WTO member countries equally, that is, by imposing equal tariffs on them, etc GSP exempts WTO member countries from MFN for the purpose of lowering tariffs for the least developed countries, without also lowering tariffs for rich countries.
The GSP Plus status will allow almost 20 per cent of Pakistani exports to enter the EU market at zero tariff and 70 per cent at preferential rates. 406 members of the European Parliament expressed their support for Pakistan while 186 lawmakers voted against the status, which has been granted till 2017. This status would enable Pakistan to export more than US $1 billion worth of products to the international markets. Only the textile industry would earn profits of more than Rs1 trillion per year. Pakistan benefits from generous tariff preferences under the GSP+ arrangement aiming to support sustainable development and good governance. In order to maintain GSP+ Pakistan has to keep ratification and effectively implement 27 core international conventions on human and labour right, environmental protection and good governance.
The EU is Pakistan's largest trading partner after the United States. The total trade between Pakistan and EU has cross US $11 billion. Out of which US $7 billion is Pakistan's export to EU and US $4 billion is Pakistan's import from EU. The trade is in favour of Pakistan. Pakistan's trade with the EU is mainly composed of textiles, which account for over 55% of the total Pakistani exports, followed by leather products. Pakistan's export structure lies very much on a traditional product mix. The imports from the EU to Pakistan mainly comprise finished products like mechanical and electrical machinery, chemical and pharmaceuticals.
The GSP Plus would allow Pakistani exports to enter the 28 member countries of EU. Market of 500 million consumers is now open for Pakistani exports. Cotton and Textile products are the largest exporting sectors of Pakistan. Pakistan has edge over its Competitors (China, India, Vietnam, Thailand, Indonesia). They do not have duty free access as well as no preferential access.
To maintain GSP plus status, Pakistan has to ratify and effectively implement 27 core international conventions on human and labor rights, environmental protection and good governance. The extension of the EU's GSP+ preferences to Pakistan will certainly boost its competitiveness, but ultimate success in accessing the EU market in greater quantities will also largely depend on Pakistan's ability to meet EU consumers' demand, both in terms of reliable export volumes and quality, to increase its production efficiency, to invest in technologies and skilled manpower, and to be able to deflect its competitors' defensive or offensive actions. GSP+ alone will not suffice. In the absence of GSP plus Pakistani exports have to pay extra duties from 3 % to 10 % (varies from product to product); consequently, products from Sri Lanka, Malaysia and Bangladesh become attractive for European buyers because of price difference.
Now, after GSP Plus status Pakistani products will be available in EU markets at competitive prices. It leads the surge in demand of Pakistani products. It is estimated that Pakistani textile exports to EU will increase by 1.0 to 1.5 billion dollar per annum. No doubt in the present context of shortage of foreign exchange reserves it provides a support to Pakistan economy. Moreover, it may support the value of Pakistani rupee.
Beside trade, EU also plays a crucial role in social development. During the 1980s the EU launched a mix of infrastructure and social development projects which focused on development of roads, bridges, a fishing harbour facility, rural electricity infrastructure, livestock, education, vocational training and integrated rural development. In the 1990s the EU streamlined towards policy-based social sector investment programmes, placing greater emphasis on human development and environmental management in line with shifts in government policy. 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 Baluchistan. Furthermore, EU had provided humanitarian assistance to flood victims in 2010, 2011 and 2012. Moreover, EU also helps the Pakistani students in term of provision of scholarship and study assistance in the various universities of European countries for higher education. Moreover, in order to enhance Pakistan's capacity on WTO related issues, a trade-related technical assistance programme was also launched in 2004 with a view to streamlining procedures and processes for trade facilitation in compliance with EU norms and standards. The first phase of this project has been completed and second is going on.
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COUNTRIES IN EUROPEAN UNION
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S.No. Country Date Joined
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1 Austria Jan 1, 1995
2 Belgium Jan 1, 1958
3 Bulgaria Jan 1, 2007
4 Croatia July 1, 2013
5 Cyprus May 1, 2004
6 Czech Republic May 1, 2004
7 Denmark Jan l, 1973
8 Estonia May 1, 2004
9 Finland Jan l, 1995
10 France Jan l, 1958
11 Germany Jan 1, 1958
12 Greece Jan 1, 1981
13 Hungary May 1, 2004
14 Ireland Jan l, 1973
15 Italy Jan l, 1958
16 Latvia May 1, 2004
17 Lithuania May 1, 2004
18 Luxembourg Jan l, 1958
19 Malta May 1, 2004
20 Netherlands Jan l, 1958
21 Poland May 1, 2004
22 Portugal Jan l, 1986
23 Romania Jan l, 2007
24 Slovakia May 1, 2004
25 Slovenia May 1, 2004
26 Spain Jan l, 1986
27 Sweden Jan 1, 1995
28. UK Jan l, 1973
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PAKISTAN'S TRADE WITH EU (2014) US$ MILLIONS
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Export Import Total Balance
Trade of trade
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Austria 19.64 117.06 136.70 (97.42)
Belgium 658.06 224.45 882.51 433.61
Bulgaria 19.83 13.23 33.06 6.60
Croatia 12.38 0.19 12.58 12.19
Cyprus 4.62 1.28 5.90 3.34
Czech Republic 40.71 45.69 86.40 (4.98)
Denmark 101.96 222.58 324.54 (120.63)
Estonia 21.47 2.40 23.87 19.07
Finland 60.06 61.56 121.62 (1-51)
France 429.18 398.28 827.47 30.90
Germany 1,215.48 1,070.47 2,285.94 145.01
Greece 69.96 8.88 78.84 61.08
Hungary 12.66 31.30 43.95 (18.64)
Ireland 52.67 49.42 102.09 3.26
Italy 767.19 469.53 1,236.72 297.67
Latvia 25.95 17.30 43.25 8.65
Lithuania 48.10 5.42 53.52 42.69
Luxembourg 0.41 13.66 14.07 (13.25)
Malta 7.62 0.12 7.74 7.50
Netherlands 684.74 324.51 1,009.25 360.23
Poland 146.17 74.97 221.15 71.20
Portugal 166.97 19.25 186.22 147.72
Romania 25.74 167.48 193.22 (141.74)
Slovakia 3.53 52.70 56.23 (49.17)
Slovenia 50.23 2.84 53.07 47.40
Spain 789.83 147.12 936.95 642.71
Sweden 134.31 259.55 393.86 (125.24)
United Kingdom 1,654.65 599.72 2,254.36 1,054.93
Total 7,224.12 4,400.93 11,625.05 2,823.20
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