Changes enacted to the quantitative requirements of GSP+ enabled Pakistan to apply for qualification under the GSP+ arrangement that will become effective in January next year. The requirements were: seven or less products should make up minimum 75 percent of exports to EU and total exports to EU should be under two percent of EU's GSP imports.
According to the brief summary prepared by Geneva-based International Trade Centre titled 'benefiting from EU GSP-plus scheme 2014 through enhancing competitiveness in the qualified sectors', and sent to the Ministry of Commerce, the new GSP+ comprises of two separate but interlinked areas, involving both private and public sectors - it provides duty-free access (subject to quantity restraint) for all listed items, including textiles and clothing, covering about 90 percent of the EU's tariff lines. The concession was subject to ratification and implementation of 27 international conventions on human rights, labour rights, environment and co-operation on controls in the areas of combating terrorism, money laundering and narcotics trafficking.
Like most other countries of the world, Pakistan has already ratified the 27 conventions. The grey areas lie in implementation and the revised monitoring mechanisms stipulated in the new GSP+ regime.
Threshold: under the new GSP+, products having a market share of more than 6 percent of total EU imports of that item will not qualify for duty-free access. This provision affects the major portion of current textiles exports (Ch 52 - cotton fabric and yarn, Ch 55 - man-made fibers, Ch 57 - carpets, Ch 61 - knitted apparel, Ch - 63, textiles made-ups, including bed wear and towels) and leather articles Ch 42), which already have a strong market share and, therefore, will continue to enter the EU under normal GSP duties.
Annual Cap: The new EU's GSP+ also places a ceiling, 17.5 percent, for all goods other than textiles and ethanol (14.5 percent), on the value by which a product's import increases over the previous year, at which point duty-free preferences will be withdrawn and that product will enter at normal duties.
Safeguards: The GSP scheme also includes safeguard provisions for agriculture, textile and fisheries products whereby tariffs can be suspended when imports of products enter at such volumes or prices as to threaten domestic industry.
Opportunities:
Textiles: Except for Ch 55 (manmade fibers), where practically all the currently exported products have more than 6 percent market share, duty-free market access remains available on all other lines, including in Ch 52 (cotton yarn and fabrics), Oh 63 (textile made-ups), Ch 62 (clothing, woven) and Ch 61 (clothing, knitted), which by themselves constitute 67 percent of all exports to EU.
The brief summary also highlighted the size of the EU market in products where Pakistan's exports are under the 6 percent threshold and the size of the available EU market in those products:
To place these market openings in perspective, Bangladesh's exports to the EU of Ch 61 were $8545.01 millions and of Ch 62 were $4462.36 millions in 2011, so there is great room for expansion.
Footwear: The footwear sector (Ch 64) stands to benefit greatly from GSP+ duty free access. MNF duties in the EU on footwear are 8 percent, which is a big margin in an intensively price-competitive export market (over $50 billion.). In recent years footwear exports to EU from Brazil, Thailand and Vietnam have declined respectively by 35 percent, 18 percent and 14 percent, respectively, because of the withdrawal of duty preferences. In the same period, Nicaragua (GSP+) and Bangladesh have used duty free access to drive their exports of footwear (Nicaragua from zero to $12.5 million in less than three years, Bangladesh by 94 percent in five years.)
Ethanol: EU autonomous trade preferences for 2012-2013 have allowed a quota of 75,000 tons import of ethanol from Pakistan. Under the new GSP,+ the specific duty on ethanol will not apply for quantities imported up to 113.5 percent of exports made in 2013. Controlled sales will enable ethanol exporters to re-build their market in the EU without inviting the negative attraction of 2005.
Other sectors:
Ch 39: (plastic products) have a 6.5 percent duty, products as PET and polystyrene have an $6.9 billion market in the EU. Imports from Pakistan proved to be competitive.
Ch 08: (fruits, nuts) GSP+ will provide duty advantage of between 5 percent -16 percent , plus specific duties on some items. Against Pakistan's $65.8 million worth exports to the EU, India has exports of $460.5 million.
Oh 71: Pakistan's jewellery exports to the rest of the world are rising much faster than to the EU, where the expatriate/Pakistani origin has more spending power than in other areas. Removal of Indian jewellery exports from the US's GSP in 2008 led to a doubling of Pakistani jewellery exports to the US within two years. India's Ch 71 exports have graduated out of EU's GSP, creating an additional market opportunity.
Recommendations for the private sector:
Textiles:
-- Increase in production of products using man-made fibers
-- Use "regional cumulation" to import man-made fibers from India
-- Identify reasons for the big gap between Pakistan and Bangladesh in production of knitwear
-- Diversify the product lines to utilise available tariff headings in Ch 61 and 62
-- Investment in modern dyeing and printing facilities to upgrade quality of knitted fabrics
-- Invite MNC/overseas investors in apparel production
-- Develop closer co-ordination at association level with overseas counterparts
-- Sector associations to ensure basic compliance of EU's GSP+ requirement by their members
-- Capacity-building for smaller exporting units in social compliance areas
-- Increase women workers in the shop floor - exports are seen to be negligible in many items of women's wear that are best made/assembled by women workers
-- Training of women workers in the infant wear category, which has a large market in the EU.
Leather & Footwear:
-- Attain minimum EU environment requirements
-- Invite MNC collaboration in design/production/marketing
-- Invite Chinese, Vietnamese companies to develop production facilities in Pakistan
-- Highlight achievements in adoption of labour standards
-- Strongly project existence of better working conditions prevailing in Pakistan than in other SAARC countries
-- Concentrate on development of women's footwear, which is the largest segment of the EU market
-- Leather Garments Association should liaise with and improve co-ordinate with COTANCE to create a better trading climate and EU industry to understand the importance of leather industry to the domestic economy
Ethanol:
-- Develop sector level mechanism to avoid unrestrained selling and price-cutting that led to earlier anti-dumping measures and re-imposition of duties
Fruits:
-- Focus the marketing effort on eastern member states of the EU
-- Develop collaboration with Turkish companies for promotion of export sales in new member states
-- Invite Chinese, Malaysian, Thai collaboration and investment in development of production facilities for export of fresh and processed fruit.
-- Capacity-building in SPS requirements
-- Capacity-building in grading, quality control, packaging and treatment
-- Developing linkage with internationally recognised brands, they will bring managerial and marketing efficiencies
Seafood:
-- Urgent attention for improvement of harbour and auction premises, processing facilities to attain EU minimum standards
-- Develop co-ordination with relevant EU seafood importers associations for development of private standards
-- Improve social benefits of fisher folk families
-- Identify and fill gaps in off-shore and on-shore frozen storage
Chambers of Commerce, FPCCI:
-- Coordination with provincial governments and the federal government for uniformity in provinces of regulations relating to work conditions and environment standards
-- Develop credible domestic independent monitoring bodies that can advise/report on compliance
-- Capacity building of exporters regarding the EU market
-- Disaggregated market studies of the EU's 27 member states, each having its own special requirements
-- FPCCI to develop mechanism with counterparts in Sri Lanka, Bangladesh, Nepal, India, the Maldives for optimum benefits from regional cumulation allowed in rules of origin.