Pakistan seeks more from EU tariff cuts

Monday, 11 October 2010 22:03 - - {{hitsCtrl.values.hits}}

ISLAMABAD (Reuters) - Pakistan is looking to persuade the European Union that unless it adds bed linen and knitwear to a list of duty-free items receiving tariff cuts, its latest concessions will prove to be largely meaningless.

Pakistan says it needs more international support to overcome the impact of the devastating floods, which killed 1,961 people and affected more than 20 million, and maintain political stability.

The EU scheme, announced last week, to suspend tariffs on 75 types of Pakistani-made goods which account for about 27 percent of exports to the EU, will boost sales by about 100 million euros ($139 million).

However, many leading Pakistani textile manufacturers say that without including the country’s main products of bed linen and knitwear, the scheme does not go far enough.

“This is just unbelievable. Concessions are mostly on raw materials -- 80 percent is raw material and 20 percent where we have such a small exports, where we don’t have the volume, where we can not move further,” said Bashir Ali Mohammad of Gul Ahmed Textile Mills.

Yasin Siddik, APTMA’s vice chairman, said the concessions were “meaningless” and the government should push the EU for more.

“This is just one-tenth of what we wanted,” he said.

The duty-free access to goods from next year, mostly includes textile exports, such as cotton yarn, woven fabrics and cotton jackets but not bed linen and many categories of knitwear, industry officials said.

“They are providing us a break in those product lines which have the capacity of only 100 million euros increase but our major increase capacity is bed linen and knitwear,” said Gohar Ijaz, chairman of All Pakistan Textile Mills Association (APTMA).

“We must accept this and acknowledge the positive step by the European Union, but we must push for these two items,” he told Reuters.

Pakistan’s total textile exports stood at over $10 billion in the 2009/10 financial year (July-June), of which about $6 billion worth of textile products went to the United States and the EU. Total exports to the EU totalled $4.4 billion in 2008/09, according to official statistics.

Analysts say the concessions would benefit the industry but are not as comprehensive as those offered between 2002 to 2004 when Pakistan was included in the drug-related arrangements of the EU’s generalised system of preference scheme.

After those concessions, Pakistan’s exports to EU increased to $4.07 billion in the financial year 2004/05 from $2.77 billion in 2001/02.

“Tariff concessions were... mostly on low value-added items but the strength of Pakistan is in home textile, mainly bed linen and concessions have not been given on that,” said Umer Pervez, analyst at AKD Securities Ltd.

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.