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Pak lavished with tariff sops

G. Srinivasan

NEW DELHI, Oct. 24

CLOSE on the heels of the tangible benefits in the form of tariff concessions the European Union (EU) conferred on Pakistan on the latter's textile and clothing exports, the US too is contemplating a similar deal to Pakistan as part of its bigger strateg y in wooing Islamabad.

The Government sources told Business Line here that Pakistan is seeking a waiver of all tariffs and quotas on its clothing and textile exports to the US amounting to $1.9-billion. The US maintains 40 quotas on Pakistan as compared to 14 quotas maintained by the EU. One US quota (on combed cotton yarn) would have to be withdrawn immediately since October 10,

2001, following the victory of the case by Pakistan on this against the US before the WTO.

It might be recalled that all tariffs on clothing imports from Pakistan are to be lowered effective from January 1, 2002 under a comprehensive trade package the EU unveiled on October 16, 2001 in Brussels. The EU is Pakistan's biggest trade partner accou nting for 30 per cent of Pakistan's garments (with US accounting for another 23 per cent of Pakistan's garment exports).

Sources said that the EU is trying to utilise the provisions in its GSP which provides a special regime for countries combating drug trade. So far this special regime was applicable only to the Central American and Andean Pact countries. The fact that th e EU's recent gesture is likely to be replicated by the US has made the Indian authorities sit up and take stock of the evolving situation.

The growing series of trade-related benefits being conferred on Pakistan for its crucial role in helping the global alliance against terrorism and its geographical proximity to the theater of action where the US has a lot of stake had already become a so re point in some least developed countries including Bangladesh and Sri Lanka, besides India, the sources noted.

There is even suggestion to the effect that New Delhi should coordinate with Bangladesh and Sri Lanka in getting around the world about Pakistan's deep involvement in Afghan drug trade so that it should not be eligible for the special GSP provisions for combating drugs trade.

However, this idea is not to be pressed as it should be espoused by countries directly hit by such tariff concessions, the sources added.

Overly worried over the latest burst of trade-related benefits on Pakistan, the sources said that garments constitute a crucial segment of the country's exports with India's exports of readymade garments (RMGs) to restricted (quota) countries during Janu ary to September 2001 amounted to $2.95 billion of which exports to the US alone fetched $1.4 billion and exports to the EU $1.37 billion.

On an average, garment exports to the EU and the US attract tariff rates between 17 to 22 per cent. They are also hampered by quotas which are fixed bilaterally through negotiations even as the extant level of utilisation of quotas by India is more than 100 per cent in respect of both the EU and the US.

The increase of EU garment export quota to Pakistan by 15 per cent besides providing greater access to the EU market would also result in an elimination of the extant preferential 7 per cent duty rate applicable to garment exports from Pakistan. As a res ult, the Indian garment exports to the EU would be subject to severe competition from Pakistan garment exports with other developing countries also being buffeted by this largesse to Pakistan.