The Pakistani textile exporters are thinking of using Bangladesh origin for their exports to the European Union (EU) to avail of the duty-free status under the new Generalised System of Preferences (GSP) scheme, industry sources revealed.
To avoid 8.5 percent import duty under the new 10-year GSP scheme coming into force from July 1, 2005, the possible option for the Pakistan exporters is to export dyed and printed fabric to Bangladesh for cutting and stitching and then onward export as a Bangladesh product, the sources said.
It added that to survive, the Pakistani export houses would have no option but to shift their cutting and stitching operations to Bangladesh.
The plan is feasible since these operations are labour intensive rather than capital consuming. The only harm in the strategy is that it would create a large-scale unemployment in the country.
According to sources, the EU has suggested three different categories in the new GSP scheme. The first is basic GSP scheme designed for all developing countries which would avail of a 20 percent reduction in normal customs duty in all trade sectors which have less than 15 percent share of the GSP imports.
However a benchmark of 12.5 percent has been fixed for the textiles. The second one ie GSP plus scheme is meant for countries which have ratified and implemented certain international conventions and are considered vulnerable which implies that their annual exports to the EU are less than 500 million dollars or their exports are not diversified, (75 percent of their exports must be in just five sectors).
The third GSP facility is known as everything but arms scheme. This is restricted to the 50 poorest countries in the world, including Bangladesh, which would have full duty-free access to the EU.
The sources predicted that Pakistan and India would qualify for the basic GSP scheme, but not for the GSP Plus scheme. China would not qualify for any of the GSP facilities and thus would have to pay 12 percent import duty on the textiles, while Pakistan and India would have to pay 8.5 percent duty and Bangladesh would have zero duty.
The textile exporters suggested to the government to conduct a strong lobby among the EU member states, especially in England, France and Germany, to try to ensure that Pakistan was given a place in the GSP Plus scheme.
This would help the country a level playing field with Bangladesh and would allow Pakistani exporters to compete with China.
A presentation to this effect was made to German Chancellor Gerhard Schroeder, during his recent visit to Pakistan, while the exporters are also lobbying in the government corridors through their influential buyers in the EU member States. The exporters emphasised the need for a swift action by the Ministry of Commerce as timing was critical and the matter would be decided one way or other within the next few weeks.
They wondered as why the Ministry was delaying engaging a top Brussels lawyer to fight Pakistan's case despite the exporters' offer to pay 100,000 dollars as the law firm expenses.
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