Major trade boost: $1.3 billion goods allowed into EU duty-free

BRUSSELS (October 08 2010): Jeans, slippers and truffles will be among
900 million euros ($1.3 billion) in Pakistani goods allowed into the
European Union duty-free from next year under EU plans for trade
assistance to the flood-hit country. The scheme, unveiled on Thursday,
will suspend tariffs on 75 types of Pakistani-made goods which account
for about 27 percent of exports to the EU, boosting sales by about 100
million euros.

The move is meant to help Pakistan recover from devastating floods and
maintain political stability. In parallel, Islamabad has agreed to
take back illegal migrants returned by EU states. Most of the trade
concessions will be on textile exports, though there will be no tariff
cuts on Pakistan’s main product – bed linen – because of EU industry
opposition.

“This proposal will offer a real boost to Pakistan’s economic
recovery, while at the same time taking into account sensitivities of
EU industries,” EU trade chief Karel De Gucht told reporters. The plan
foresees suspending tariffs for up to three years, and will include
monitoring to ensure exporters from other states do not try to smuggle
their wares into Europe via Pakistan to avoid duties.

It must be approved by EU governments, the European Parliament and
members of the World Trade Organisation, including India, Sri Lanka
and Bangladesh, which compete with Pakistan for textile sales to
Europe. EU officials said they hope for full approval by January. EU
manufacturers criticised the plan for including sensitive products
such as cotton yarn, fabrics and towels, in which European industry is
already struggling to compete with countries that have access to cheap
local cotton.

“We don’t believe our textile and clothing industry should have to pay
for what Europe is giving to Pakistan,” said Luisa Santos, head for
international trade issues at EU textile and clothing lobby Euratex.
“This will not help regular Pakistanis. This will help a couple of
companies that already have turnover of more than 200 million euros,”
she added.

Among companies that could gain from the plan are Pakistan’s largest
listed textile company, Nishat Mills Ltd and Sapphire Textile Mills.
Reeling from floods that have displaced millions, Pakistan has said it
urgently needs greater market access to help stabilise its economy,
and has said Islamist militants could exploit its economic crisis and
any political instability.

The plan was unveiled on the same day as EU ministers approved an
agreement with Pakistan that allows either side to return any illegal
migrants to their country of origin. Britain, Sweden and Germany
pushed for the trade benefits, but France, Italy and other EU states
with domestic textile and clothing industries were reticent at a time
of economic stress. Others say the concessions will do most harm to
Bangladesh.

“This is robbing Peter to pay Paul,” said one trade expert from a
country outside the EU. “The only reason it will go through is because
of political relations in the region.” Products affected by the tariff
suspension include cotton yarn, woven fabrics, cotton jackets,
trousers, baby clothes, socks, gloves, sandals and mushrooms. The
tariff break also allows for 100,000 tonnes of ethanol per year.