Generalised scheme of preferences plus

Diplomatic relations between Pakistan and the European Union was established in 1962. The first co-operation was initiated in 1976, followed by a formal Commercial Co-operation Agreement in 1986 and Co-operation Agreement, 2004 which plays a crucial role in closer relationship in promoting trade and investment. Pakistan-EU bilateral trade relations are governed by the Co-operation 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 Generalised Scheme of Preferences (GSP) from 1 January 2014.
The GSP is a formal system of exemption from the more general rules of the World Trade Organisation (WTO), (formerly GAT T). 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 r e q u i r e s W T O m e m b e r 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 allowed almost 20 percent 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 Rs 1 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 is almost US $11 billion. Out of which US $6.6 billion is Pakistan's export to EU and US $4.2 billion is Pakistan's import from EU. The trade is in favour of Pakistan. Pakistani exports to the EU are dominated by textiles and clothing as well as leather products. Textiles and clothing account for just under 75% of Pakistan's exports to the EU. The imports from the EU to Pakistan mainly comprise finished products like mechanical and electrical machinery, chemical and pharmaceuticals. This trade concession was meant to provide a major boost to our exports, given that EU accounts for 25 per cent of Pakistan's total exports. Yet, while neighbouring countries like Bangladesh have managed to increase their exports to the EU due to this facility, our exports to the EU in fact declined.
To maintain and sustain the 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.
In the recent past, the UK has decided to exit from the EU. The policy makers have forecasted that there will be no significant impact of this decision on Pakistan's trade with EU. Pakistan will demand the same package from Britain in the future or may sign an FTA for trade.
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 Pakhtunkhwa (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.