Impact of GSP+ status review on Pakistan’s exports

If the GSP+ status is withdrawn by the EU, Pakistan's textile industry, the highest contributor of exports to the EU would suffer as the tariffs would make Pakistan's exports uncompetitive compared to the rest of the exporting countries.

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On 29 April 2021, the European Parliament passed a resolution decrying the deterioration of what was already a terrible record of religious persecution in Pakistan. The resolution was overwhelmingly passed, 662 to 3, with 26 not voting.

Significantly, the resolution also called for the Commission and the European External Action Service (EEAS) to immediately review Pakistan’s eligibility for GSP+ status in the light of current events and whether there is sufficient reason to initiate a procedure for the temporary withdrawal of this status and the benefits that come with it.

The argument was based on the recent case of a Christian couple, Shafqat Emmanuel and Shagufta Kausar, who was sentenced to death for allegedly sending a text message insulting the Prophet Mohammed; whereas the couple denied any responsibility.

In January 2014, the EU granted Pakistan status under its flagship trading scheme, the General Scheme of Preferences Plus (GSP+). The GSP+ provides enhanced and preferential free trade between the EU and a small list of countries that are meant to be among those developing countries with the best human rights records.

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The EU resolution mentions the recent clashes by TLP, saying, “the repeated and deceptive attacks against the French authorities by members of the Pakistani government and from radical Pakistani groups, including the extremist religious party Tehreek-e-Labaik, have escalated on the ground of blasphemy since the French authorities reactions after the terrorist attack against a French school teacher for defending the freedom of expression; leading the French authorities, on April 15, 2021, to recommend to their nationals to temporarily leave the country”.

The EU resolution also mentions that the appeal to release the Christian couple has been constantly delayed, and the latest postponement occurred in February 2021.

Economic Impact 

In March last year, Pakistan’s GSP+ status was extended till 2022. As a result of this duty-free access available to Pakistan in 27 EU member states, Pakistan’s exports to the EU enhanced from 4.538 billion euros in 2013 (before the GSP-Plus status) to 7.492 billion euros in 2019, registering an increase of 65 percent.

Textile and garments have been the major benefactor of the GSP+ status, along with increased employment opportunities availed by women of Pakistan in Europe.

It is worth mentioning that amidst the pandemic has seen an increase in exports in textile to Europe as the regional competitors suffered lockdowns due to high COVID 19 cases.

EU is Pakistan’s second-largest trading partner next to the United States, as Pakistan has a huge potential market of 500 million customers for Pakistani products. According to Pakistan Textile Exporters Association, Pakistan’s exports to the EU may stay in a danger zone, as the review is to happen in the future.

This step by the EU can prove detrimental to Pakistan’s economic recovery during the pandemic, as Pakistan already faces another International Governmental Organization, FATF’s plenary hearing in June, over whether to remove the country from the grey list or not.

Talking to GVS news, All Pakistan Textile Mills Association’s (APTMA) Executive Director, Mr. Shahid Sattar said, “Pakistan has $6 billion worth of exports to EU and almost 5.25 billion of them are textiles. If the GSP+ status is withdrawn, Pakistan’s textile exporters would have to pay 20 percent tariff, making the industry uncompetitive compared to the regional exporters, or the exporters would have to reduce the selling price”, to keep their products attractive still to the buyers.

He added that the additional price due to tariff would deter people from buying our products, resulting in loss of potential consumers for the exporters.

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The FATF plenary in June along with the GSP+ review by the EU could deter investments from entering Pakistan until the country gets a clean bill of health from both Organizations.

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