Breakthrough in economic diplomacy
By Afshan Subohi
DEMOCRATIC Pakistan achieved a breakthrough in economic diplomacy when the European Union last week agreed to grant it tariff concessions to improve access of specified textile categories to its market.
The dividends of the current EU decision would depend on: one, the quality and extent of duty breaks; two, the capacity of the corporates to utilise the window of opportunity. In cases of tax breaks, the private sector would be called upon to demonstrate higher level of skills and competitiveness to swiftly occupy the space created in the market and stabilise, modernise and achieve scales to sustain higher trade level beyond the concession timeframe.
According to reports emanating from the EU headquarter, the details of the deal have yet to be decided. Brussels has given its word that the EU will finalise the offer in consultation with World Trade Organisation latest by October 2010.
The EU stopped short of inking the final deal to rule out the possibil ity of getting dragged into lengthy litigation process initiated by opponents of the move. It could kill the initiative even before it flies, an expert privy to the process of negotiations told Dawn over telephone from Brussels last week.
The European Union comprising 27 nations, accounts for 22 per cent of the world economy and is a lucrative consumer market.
On September 16, a summit in Brussels decided to offer trade concessions to help Pakistan overcome the impact of floods, perk up economy and maintain political stability.
The EU decided in principle to aid-linked trade offer to Pakistan to support a nation devastated by flash floods and struggling to revive economy, battling extremism and persistently threatened by extra-democratic forces in the country, a senior diplomat told Dawn from Brussels over phone.
The concessions that require WTO waiver may be worth $390 million a year.
The aggregated cost to the economy owing to destruction to agriculture, social and physical infrastructure has yet to be assessed but runs into billions of dollars. The economic difficulties have mounted, inflation and unemployment have shot up, the currency has been losing value against the dollar, investible funds moving offshore, real estate depressed and the current account deficit has touched an alarming level.
Business leaders closely following the Brussels meeting heaved a sigh of relief at the agreement. Many leaders contacted in Lahore and Karachi expressed their satisfaction over the EU move.
Gohar Eijaz, the newly elected Chairman All Pakistan Textile Mills Association, praised the governments commercial diplomats and veterans in the textile sector who were active ly involved in the process of trade negotiations. Pakistan suffered for a decade because of preferential treatment of its regional competitors in that major market.
We are excited over the good news that came after such a long wait. The textile sector is all set to pounce on any opportunity. If we get the concession we are hoping for this October, the textile industry would expand and create as many as five million additional jobs a year through its forward and backward linkages, besides earning sizeable foreign exchange. He agreed that the industry needed to shed old habits of leaning too heav ily on the government, be proactive to defend and pursue its interests in world commercial capitals and global multilateral organisations.
Some other leaders of textile subsectors (bedlenin, knitwear, garments) expressed appreciation but wanted to defer their celebrations till the time the biggest trade bloc spells the details of the offer. Some tycoons were sceptical of the final outcome as they were afraid of the lobbyists of competitors who, they feared, could outsmart pro-Pakistan EU leaders in absence of physical presence of experts of commerce ministry and textile representatives in Brussels.
Till Thursday last, the government was waiting to be informed through proper channel. The seniors in the foreign and commerce ministry declined to make any comment before details of the decision were conveyed to them formally.
Zafar Mehmud, federal secretary commerce was reached in Islamabad over telephone a day before the agreement for his view on possible shape and size of the offer. He told Dawn that the government was not formally informed till then of any development or hurdles in the way of agreement. We will learn from the press what transpired in the meeting.
We have not yet been informed, the gentleman cut short the conversation.
Before final decision was arrived the Finnish foreign minister Alexander Stubb reported to have aired his views through media. To me it means humanitarian aid, development aid and trade. Its a question about the stability of the region and all instruments should be used.
It is expected that suspension of tariffs on textile proposed by EU Trade Commissioner Karel De gucht will be time-bound, limited, targeted, and be relatively quickly implemented.
