EU's duty waiver to Pakistan kicks up debate
Containers are pictured at Chittagong Port. Photo: Anurup Kanti Das
The proposal of an EU duty waiver for Pakistan recently sparked a heated debate for its sensitivity. The debate reached such a high point that the government officials had to hold a press briefing to clear the position of Bangladesh regarding the issue.
The debate intensified when many thought that Pakistan could not gain the duty facility for 75 products for opposition of Bangladesh and for a change in its position at the meeting of Committee on Trade in Goods (CTG) of the World Trade Organisation (WTO) in Geneva on November 7.
While, explaining the country's position, both foreign and commerce secretaries stated that Bangladesh did not change its position regarding the issue, although India, the archrival of Pakistan, has withdrawn the long-time objection in granting the duty-free benefit to Pakistan for 75 products.
The high-ups of the government explained Bangladesh's position, tacitly opposing the EU move and placing some conditions to the WTO in granting the facility to Pakistan.
Bangladesh would have no objection to a revised proposal if it is formally submitted to the WTO, the commerce ministry said in a statement.
Regarding the position, Commerce Secretary Ghulam Hussain said firstly, in principle, Bangladesh thinks aid and trade should not be mixed up.
Secondly, he said the EU can allow duty-free entrance of 75 products excluding eight garment items as both Pakistan and Bangladesh are strong in the same categories of the garment items.
Thirdly, still, if the EU wants to allow duty-free access to Pakistan, it (the EU) should impose a cap after a certain rate of growth in export of the agreed products, so that Bangladesh's export to the EU, its largest export destination, remains unhurt.
The commerce secretary said the indication from the EU is that it might set a cap on import of 13 Pakistani products, including six of the eight products to which Bangladesh has objection.
But, in export of the rest two garment products both Bangladesh and Pakistan will have to compete in the EU as the two items have been kept out of the cap, Hussain said.
Pakistan has to lobby with the WTO and its other members for gaining such facility because it is not a least developed country and its claim is a unilateral one.
Bangladesh gained the zero-duty facility to the EU as an LDC.
The EU has relaxed the Rules of Origin (RoO) for the LDCs since January this year under the Generalised System of Preferences (GSP).
Pakistan's plea for the duty waiver became stronger when the country faced a devastating flood last year.
Bangladesh is going to lose a significant chunk of its business if Pakistan is granted the waiver.
According to an estimate of the commerce ministry, Bangladesh will lose a total of $58.38 million in two years if the EU grants Pakistan the facility for eight garment products.
Bangladesh has already expressed its concern for the eight garment products.
In this case, Pakistan is in an advantageous position, because the country has its own cotton, while Bangladesh is a net importer of the fibre.
Even if the EU imposes a cap on the export of eight products from Pakistan after a certain rate of growth in export, still the country will lose business to some extent.
In the revised plan, the EU has already submitted the proposal of imposing a cap on 13 products from Pakistan.
If this proposal is finally accepted by the EU, Bangladesh will lose a total business of $19.20 million only in two uncapped items in two years, the commerce ministry said.
Pakistan was supposed to gain the revised EU facility in the CTG meeting in Geneva on November 7, as almost all the countries agreed on humanitarian ground to support the move.
But Brazil, Indonesia and Peru raised objection, said a commerce ministry official requesting not to be named. Those countries demanded further consultation with them in giving the facility.
For the latest move by Pakistan, the regional trade is going to take a new turn as recently the country has given India the status of most favoured nation under which both the countries plan to double bilateral trade within the next five years.
India-Pakistan trade was recorded at $2.5 billion in 2010-11 and both the countries are targeting to double the volume in the next five years as Pakistan will reduce import barriers and raise import quotas for Indian goods under the status.
“We support the government's position. This was also our position from earlier,” said Shafiul Islam Mohiuddin, president of Bangladesh Garment Manufacturers and Exporters Association.
The local industry might not lose a big chunk of business if Pakistan is granted the facility, he said.
He said Bangladesh should also grab different opportunities through establishing ties with other countries, because India is trying to enter into a free trade agreement with the EU.
Mustafizur Rahman, executive director of Centre for Policy Dialogue, said the position of Bangladesh is politically pragmatic as well as protective to safeguard the interest of the country.
He said, in principle, the EU cannot offer the same facility to a developing country which was given to the LDCs.
“If this happens then there will be no differences between developing countries and the LDCs,” he said.
Terming its position constructive, he said Bangladesh has taken such a position to avoid any confrontation with the EU.
He said the move will hardly hamper business of Bangladesh as the country has competitive strength. Trade erosion will be very insignificant, he added.
Bangladesh exported knitwear worth $6.90 billion to EU in fiscal 2010-11 and woven garments worth $3.61 billion, according to Export Promotion Bureau data. The amounts were $4.71 billion and $2.48 billion respectively in the previous year.
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