EU-Pakistan Trade Relations

The Role of GSP Plus Status and Pakistan’s Enhanced Access to EU Markets.

The Generalised System of Preferences (GSP) Plus is an instrument through which the European Union (EU) intends to encourage not only free trade with the developing countries by providing them tariff free access to the EU markets, but also promote sustainable development. The latest statistics on trade between Pakistan and the European Union (EU) published in March 2020 included remarkably positive figures: The Pakistani exports to the EU in 2019 amounted to nearly €7.5 billion, 8.99% higher than in 2018. This comes a few days after the European Parliament in Brussels debated the trade preferences given by the EU to a number of countries, including Pakistan. Pakistan is the single largest beneficiary of the EU’s GSP+ trade regime, which waives import duties on a wide range of products. Trade is one of the cornerstones of the EU’s relationship with Pakistan. The EU supports Pakistan’s integration into the world economy and its sustainable economic development. The GSP scheme allows preferential market access for exports from developing countries to the EU. The GSP+, an even more advantageous version of the standard GSP scheme, offers duty-free access for nearly two-thirds of tariff lines. For Pakistan, 76% of its exports fall under this category. These preferences are tied to progress to be demonstrated in the implementation of 27 core international conventions on human and labour rights, environment protection and good governance. Pakistan’s export base is highly concentrated in textiles. In addition, if exports were more garments than textiles, the profit to the country would be greater. In addition, this is an export market that grew by 90% over the last year. Many more products could be exported to the EU under the GSP+ preferences. A more diverse export base, in particular including more value-added products, would allow Pakistan multiply the benefit of GSP+. Pakistan is also one of the EU’s major development partners, with one of the largest programmes of aid in Asia. For 2014-2020 period, the grants provided for bilateral cooperation with Pakistan amounted to €603 million. EU-Pakistan cooperation priorities for 2014-20 programme period focus on rural development (50%), education and vocational training (35%) and good governance, rule of law and human rights.

This research paper analyses to what extent the GSP Plus has helped in enhancing Pakistan’s exports to the EU and removed the constraints that affect the EU-Pakistan trade relations while putting forward recommendations for enhancing EU-Pakistan trade relations in the future. If fully utilised, this paper argues, the GSP Plus status has the ability to earn some extra foreign reserves for a country like Pakistan which is already facing a severe current account deficit, public debt and balance of payment issues.