By now, everyone and their great grand aunt have an opinion about how the conferral of the GSP Plus status will impact the countrys textile industry. But, very little attention is being paid to the step children-the export categories relegated to the backburner because they aren't shiny enough to attract the attention of the magpies.
Admittedly, it has been the textile exporters who have been making the most noise. And make no mistake; this is the sector that earns Pakistan the most number of dollars, and will reap the biggest bounty once the act is passed in December. But, some of our non-traditional export categories have also been slowly gaining traction and will find a world of opportunity once the trade agreement is worked out.
One particular category on the threshold of making it big is the footwear sector. Exports of Pakistani footwear to European markets have seen a steady rise after a duty waiver on access of 75 products (of which 3 were footwear related) was cleared by the EU in 2012. Since then, other factors including the withdrawal of duty preferences from countries, including Brazil, Thailand and Vietnam (the 2nd biggest exporter of footwear to EU), have further tipped the balance in Pakistan's favour.
It is important to note that footwear is one of the higher tariff products that enter EU, with duties ranging from 8-16 percent. This means that although competitors such as China and Thailand have a well established presence, the GSP+ status and the ensuing zero duty access will give Pakistani footwear a massive advantage in a market that is intensely competitive and where importers are forever looking for cheaper sourcing destinations.
Yet another category that has the possibility to turn into a veritable gold mine is the country's jewellery exports. Jewellery is a relatively new entrant in the country's export basket but is one that took off rapidly in recent years, sans the FY to date decline.
The recent surge in jewellery exports was a direct result of a combination of two things: namely India's removal from the US GSP scheme, which allowed Pakistani exports to capture a big chunk of the North American market, and a greater investment by local set-ups in product innovation. However, growth in the EU never really kept up pace and in 2012 exports to EU-27 made up only about 20 percent of the sector's total dispatches.
Currently, Pakistani jewellery exports are slapped with an import duty of 2.5 percent in the European market but once the GSP+ access comes through the lack of duty and absence of a graduation mechanism will lend exports plenty of room to grow. Things will be further aided by the fact that India's jewellery exports have recently been graduated out the EU GSP scheme; hence demand from a huge Southeast Asian Diaspora present in Europe is now seemingly up for the grabs.
This discussion would also be incomplete without mention of the seafood sector. Recall that seafood exports from Pakistani origin were banned in 2007 after repeated failure to meet EU's hygiene standards. Industry sources reveal the market can be regained simply by meeting basic sanitary measures.
Also remember when textile products are taken out of the equation of the products that make up Pakistan's "traditional" non-textile export categories (including sports goods, surgical instruments and Basmati rice) most already enter the European Union duty-free under either GSP or MFN rates. Therefore, the upcoming GSP+ tariff will have no positive market access impact for these categories.
So, the real beneficiaries of the improved market access will inadvertently be these smaller sectors that aren't garnering much attention at the moment. Hence, for all related players we say this: now is the perfect time to take matters in your own hand and address your shortcomings comparative to other zero-duty market players and to work out matters related to compliance with EU's regulatory framework. Now is the time to step up your game!
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EXPORT OF SELECTED ITEMS WITH UNREALIZED POTENTIAL
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Product Import Exports in % of total
Duty 2012 ($ mn) exports
to EU
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Footwear 8%-16% 74.4 1.4
Plastic & rubber 6.50% 112 1
Vegetable, Fruit and Nuts 8%-16% 231 4.2
Gems and Jewellery 2.50% 35 0.6
Seafood 8%-20% Nil (Banned 0
since 2007)
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Note: For the sake of uniformity, all of the numbers above are from UN Comtrade database.