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Photo Source: Dawn

Pakistan Reader# 218, 30 September 2021

The EU-Pakistan tussle over the GSP+ status



Given the interdependence of the EU and Pakistan on issues more than trade, the GSP+ withdrawal could affect both countries adversely

Given the interdependence of the EU and Pakistan on issues more than trade, the GSP+ withdrawal could affect both countries adversely
 

Vaishnavi Iyer
Research Intern, School of Conflict and Security Studies, NIAS

The Generalised System of Preferences(GSP) refers to concessions in trade offered by the EU to developing/developed countries to boost their economic growth. Recommended by the United Nations Conference on Trade and Development; the Eu became the first union to provide for preferential treatment to developing countries for GSP. In its 2006-13 meet EU introduced a special GSP+ for countries they deemed “vulnerable” with specialised development needs. the GSP + replaced incentivized agreements surrounding - drugs, labour rights and environment. To account for the GSP+ scheme a country must not constitute more than one per cent of the EU’s export market and must ratify and abide by 27 international conventions. In April 2021, the EU called for a council meeting to discuss the GSP+ status of Pakistan surrounding its inability to abide by the international conventions. Again, on September 25, EU officials announced that to stay within the GSP+ scheme after 2023, Pakistan must abide by the 27 international conventions and secure its Human Rights conditions.

Pakistan – Europe trade relations 
A central key to their relationship, EU is the top market for Pakistani exports. A few include - textile, leather, seafoods and farm products. Accounting for more than one-third of the tidal exports, EU and Pakistan both are interdependent in trade. Pakistani exports showed a surge of 16.25 per cent between 2013-19, regionally Germany and Spain serve as large markets for Pakistani products. Over 24 per cent of Pakistani products are accounted for in the EU markets. Moreover, under the GSP+ scheme Pakistan has overly benefitted in trade with Eastern European countries which now occupy a larger share in the Pakistani markets. It has also begun importing chemicals and pharmaceuticals, transport equipment and machinery applicates all amounting o more than 50 per cent of the total exports. 

EU’s perspective 
While not abiding by the 27 international conventions would mean a direct financial loss for Pakistan why has the EU taken time to pull the plug on the deal? After 9/11 EU announced a comprehensive development package for Pakistan. It included trade concessions. The exports to EU increased from USD 2 billion to almost USD 4 billion by 2004. The deal favoured Pakistan tremendously so that India legally challenged the deal under non-discrimination grounds before the WTO. Despite losing the preferential agreements, one of the major reasons for this preferential treatment, was that it was helping both the UK and US in their war on terror. In the wake of the recent events in Afghanistan, it becomes essential for the EU under its strategic discourse to exercise its power as a global actor. Brexit triggered a new economic instability which can be secured by ensuring control over other agreements which could potentially harm the ethics and EU commitment.EU also has its own commitments to securing Human Rights and must abide by the Rule of Law. Diplomatically the move could pressurize Pakistan to cooperate strategically with the EU amidst the AUKUS row, helping it maintain a level of Bi-lateral dominance in a region of importance to US, China and Russia.

Pakistan’s losses
Pakistan is a hub to almost all activities of concern for the same - lack of labour rights, narcotics control, human rights abuses etc. While the EU temporality withdrew itself to review the GSP+ status of Pakistan after 29 April, to Pakistan’s surprise the progress reports from 2016-18-20 were lacking in implementation of minority rights and expressions. It also failed to address blasphemy laws. With EU’s current push, if Pakistan fails to abide by the conventions then it is set to face extreme economic consequences. As of 2020 EU accounts for 28 per cent of Pakistani exports. As mentioned above the only major exports of Pakistan are tactile and clothing which account for 75 per cent of the EU market and the non-diversification of the exports would make Pakistan vulnerable in such a situation. Despite the availability of GSP+ Pakistan has failed to account for an opportunity to add value to its goods. It has failed to achieve this despite having gotten a seven years GSP+ membership. Losing a deal owing to human rights abuses will affect the image of Pakistan at the world forum, which is in question anyway in relation to its support to Taliban. While EU may not negatively sanction Pakistan; losing out on GSP+ would mean economic loses to Pakistan and an anti-EU sentiment for the European union for domineering over smaller countries. 

Future prospects
Pakistan still has two years left to abide by the schemes, as EU still is left with finding sufficient claims to temporarily withdraw from the deal. Secondly, the Afghanistan factor give Pakistan a leverage in the situation to practice good diplomatic ties with EU and other countries to reemphasize its position in international affairs to boost for a political conclusion in Afghanistan. Thus, both countries have deeper levels of interdependency than only economy to continue with the GSP+ deal. 

References 
Muhammad Riaz Shad,” The GSP+ Status of Pakistan in the European Union: Challenges and Prospects,” Global Political Review, 2021
Mubarak Zeb Khan, “Pakistan must abide by HR regimes to qualify for GSP+ after ’23: EU official,” Dawn, 25 September 2021

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