Pakistan trade profile in the first year of GSP Plus in EU show improvement but not significant enough

Pakistan has shown improvement in its trade profile in the first year of the GSP Plus in the European Union. But definitely not significant enough both in terms of diversification of markets and commodities, considering the potential the facility offers. Exports to the EU are still concentrated in a few markets and restricted to a few commodities.

About 60pc of the merchandise went to just five nations, with seven items contributing almost 75pc of the total exports. However, a positive development is that value-added goods saw a noticeable and a sizable increase in exports to less developed member-states.

There is no identifiable marker to measure the progress or lack thereof of the preferential trade package. The common yardstick to measure success is merely the overall increase in volume of export proceeds, or changes in the share of different products in the overall exports. However, a few markers can be used to assess Pakistan’s performance.

Pakistan’s traditional sectors, mainly textile and leather, benefited from the facility. The major beneficiary was the textile garments segment, which went up by over 28pc, followed by a 29pc increase in home textiles.

A minor growth of around 5pc was witnessed in the non-value added textile goods segment. Exports of footwear and some plastic product covers also benefited.

It appears that exporters have just diverted their products from other markets to Europe to avail the zero-duty facility.

Overall growth in textile and clothing exports remained negative, with the exception of minor rises in a few months, suggesting that the facility might not have helped Pakistan to move up the value chain. And no notable investments were made in the textile and clothing sectors.

Pakistan has been able to enhance its presence in the EU, as its exports surged by 21pc to $7.310bn this year from $6.023bn a year ago. However, it is still way behind its regional competitors. At the end, the GSP Plus is all about sustainable development and good governance.

In the first year, exports to Spain increased 44pc to $814.828m from $564.402m in the previous year. This is the highest-ever increase in Pakistan’s exports to Spain.

Exports to Austria grew 93pc, followed by a 46pc growth to Poland and 14pc to Sweden. The cumulative share in Pakistan’s total exports to these four countries increased 17pc to $1.202bn this year, from $839.601m a year earlier.

Cheaper imports owing to duty waivers and competitive unit prices of Pakistani goods benefited the consumers of these countries. For instance, persistently high unemployment, low wages and a fall in purchasing power in Spain boosted the demand for cheaper Pakistani goods there.

Moreover, the EU package helped Pakistan find new markets in Eastern Europe to some extent. Export proceeds to the six-nation Eastern bloc were far less than $100m. However, the growth of exports, in percentage terms, to some of these countries was in double digits.

Exports to Bulgaria went up 44pc; Czech Republic 27pc; and Hungary 43pc. However, exports to Romania and Slovakia grew by only 8pc and 9pc, respectively. There is much potential to increase exports to these countries.

Meanwhile, exports to Estonia dropped by 11pc, Croatia 37pc, Ireland 3pc and Luxembourg 12pc from a year ago. Interestingly, the export values to these countries were much higher in calendar years 2012 and 2013 when compared with 2014 — the year Pakistan was granted the GSP Plus facility.

Pakistan’s exports are still concentrated in four markets — Germany, United Kingdom, Italy and Netherlands — which constitute 60.53pc ($4.425bn) of the total exports in the first year of the package, against 61.18pc ($3.685bn) in the previous year.