EU Cuts Tariffs to Aid Pakistan
By JOHN W. MILLER
BRUSSELSEuropean Union governments agreed to suspend some tariffs on imports from Pakistan in an effort to help it recover from this summer's brutal flooding.
The cuts, however, will be less than hoped for by many activists, EU officials said, a sign that the recession is limiting what rich countries are willing to do to help those in need.
Donor countries are meeting Sunday in New York to discuss ways of raising more money for reconstruction in Pakistan.
U.S. special envoy to Pakistan and Afghanistan Richard Holbrooke said Thursday that the world will be able to fund only a quarter of the tens of billons of dollars needed to rebuild Pakistan, according to the Associated Press.
Pakistan sustained economic damage of around $15 billion, roughly 10% of its gross domestic product. Flood-relief aid committed to Pakistan so far amounts to $1.1 billion.
Pakistan will have to pay for much of the reconstruction, especially by improving its meager tax-collection record, Mr. Holbrooke said. "I don't want to withhold money they need, but I think we have to be clear that the Congress is going to be reluctant to give money if the money is filling in a gap because people are not paying taxes," he said.
With aid budgets limited, diplomats have turned to trade, where Pakistan has ample room to grow. With 170 million people, Pakistan is the sixth most populous nation on earth.
Yet its exports totaled only $13.1 billion last year, roughly the same as Ecuador, population 13.4 million. The EU imported only $4.6 billion in goods from Pakistan last year, ranking Pakistan 46th among all of the EU's trading partners. Pakistani exports to the U.S. amounted to $3.2 billion.
Pakistani textile firms, under pressure from Chinese competition, have taken the lead in lobbying for better market access in the U.S. and EU. They are finding some allies. The U.S. Chamber of Commerce wrote to Secretary of State Hillary Clinton and U.S. Trade Representative Ron Kirk last month to advise tariff cuts.
On Thursday, EU leaders offered a tangible concession, a "The European Council underlines its firm commitment to grant exclusively to Pakistan increased market access to the EU through the immediate and time-limited reduction of duties on key imports."
Pakistan will also be allowed to join a low-tariff scheme known as GSP-plus by 2014.
EU Trade Commissioner Karel De Gucht will administer the specific cuts.
In the end, the cuts will be about $400 million a year, EU officials said.
The officials expect the commissioner to limit the cuts to around that amount to protect manufacturers in textile-producing nations such as Italy, Spain and France, which say they fear being drowned out by Pakistani imports.
There are also some reservations in the EU's trade office that Pakistan might take away too much market share from other "vulnerable" countries, such as Tunisia, Turkey and Mexico, an EU official said.
Aid agencies praised the move. "Europe today stood out from the crowd and showed the political resolve that is needed when major humanitarian emergencies emerge, like the one currently affecting over 20 million people in Pakistan," said Elise Ford, head of Oxfam's Brussels office.
Pakistani officials also lauded the plan. A similar plan had been enacted for a few years after the Sept. 11, 2001 attacks in the U.S.
"Preferential access for Pakistani textiles in the EU market would strengthen Pakistan's hands in fighting terrorists by creating jobs and prosperity," said Farahnaz Ispahani, a spokesman for President Asif Ali Zardari. "President Zardari has consistently argued that enabling Pakistan to realize its full economic potential will lead to our expanding trade and eliminating need for aid."
EU Cuts Tariffs to Aid Pakistan - WSJ.com
