Pakistan–European Union relations
Parts of this article (those related to map coloring of Croatia) are outdated.(September 2013)
Agreements and trade
The EU accounts for 20% of Pakistani external trade with Pakistani exports to the EU amounting to €3.4 billion, mainly textiles, medical equipment and leather products) and EU exports to Pakistan amounting to €3.8 billion (mainly mechanical and electrical equipment, and chemical and pharmaceutical products.
Since 2001, EU policy is to stay constructively and strongly engaged with Pakistan and to make a significant and visible engagement, both in political and economic terms. Measures include resumption and upgrading of political dialogue, signature of a 3rd Generation Co-operation Agreement, as well as additional development assistance.
In December 2006, the Council of the EU called on Afghanistan and Pakistan to deepen relations and to cooperate closely to deal with insecurity in border areas, while urging Pakistan to build on current efforts to prevent the use of its territory by the Taliban.
In order to enhance Pakistan’s capacity on WTO related issues, a trade-related technical assistance programme was launched in 2004 with a view to streamlining procedures and processes for trade facilitation in compliance with EU norms and standards.
EU and Pakistani relations are elevated to new strategic level with the EU-Pakistani Summit that has taken in 2009.
Since the start of its cooperation with Pakistan in 1976, the European Commission has committed more than €500 million to projects and programmes. During the 1980s the Commission launched a mix of infrastructure and social development projects which focused on development of roads, bridges, a fishing harbour facility, rural electricity infrastructure, livestock, education, vocational training and integrated rural development. In the 1990s the Commission streamlined and consolidated its portfolio and reoriented its activities towards policy-based social sector investment programmes, placing greater emphasis on human development and environmental management in line with shifts in government policy. In addition, the Commission provided support to smaller-scale operations with NGOs in areas such as population welfare, child labour, income generation, drug demand reduction and rural health. Under the previous CSP, the EC cooperation in Pakistan focused on human development, in particular basic education programmes at provincial level.
For the period 2002-2006 €75 million were originally allocated for development and economic cooperation. Additional EC support to Pakistan was provided following the events of 2001 in recognition of Pakistan’s role as a partner in the fight against terrorism, including € 50 million for financial service reforms and to support development of micro-finance SMEs.
The 8 October 2005 earthquake had a devastating effect on the northern areas of Pakistan, in particular Azad Jammu and Kashmir and North West Frontier Province. In response to this calamity the Commission proposed an assistance package of € 93.6 million, consisting of both humanitarian aid (€ 43.6 million) and reconstruction support (€ 50 million) for commitment in 2005. Substantial assistance was also provided under other thematic budget lines, including for Afghan refugees in Pakistan.
Under its environment cooperation policy, over the last decade the EC contributed a total of € 32 million to rehabilitation, management and conservation of natural resources, safeguarding and conservation of biodiversity, education and capacity-building through sustainable resource management with the involvement of local communities. Major target areas included upland areas of Punjab and Khyber Pakhtunkhwa (KP), benefiting more than 2 million people.
In December 2013, The European Union granted the much-awaited duty-free market access under the Generalized System of Preference (GSP)+ to Pakistan which will enable Islamabad to export textile goods to 27 European countries till 2017.
“Yes, the EU has granted the GSP Plus to Pakistan which will increase our exports by $2 billion per annum,” Minister for Finance Ishaq Dar said while talking to reporters here on Thursday.
According to a statement issued by the EU, the European Parliament voted on a resolution objecting to the delegated act presented by the European Commission, granting GSP+ to 10 countries, including Pakistan.
The resolution was defeated with 409 votes against and 182 in favour. In other words, an overwhelming majority of members of the European Parliament supported the granting of GSP+ status to Pakistan.
The GSP+ became effective from January 01, 2014. The European Commission’s preliminary estimate is that exports from Pakistan will increase by Euro 574 million annually as a result of reduction of tariffs on over 90 percent of all product categories exported by Pakistan to the EU.
On this occasion, the EU Ambassador to Pakistan, Lars-Gunnar Wigemark, said: “This is a very good day for the EU-Pakistan relations. The granting of GSP+ shows the importance the European Union attaches to its relations with Pakistan. We have listened to Pakistan’s plea for more trade and not just aid.”
In addition to expanding and facilitating Pakistan’s trade with the European Union, GSP Plus will also promote economic growth and create much-needed jobs across Pakistan. The EU consumers will benefit as well from cheaper imports made in Pakistan. “The textile industry is an obvious winner, but we should work together to ensure that other sectors of Pakistan’s economy will benefit too. It is now up to the Pakistani business community to take full advantage of the opportunities offered. This will require improvements in the business climate in Pakistan, including access to energy,” the EU ambassador said.
While there is every reason to celebrate this milestone in the EU-Pakistan relations, the GSP+ regime calls for Pakistan to fully implement its commitments under 27 international conventions on human rights, good governance, labour and environmental standards.
The EU is Pakistan’s largest trading partner. In 2012, the total EU-Pakistan trade amounted to Euros 8.2 billion. GSP+ will reduce tariffs to zero on over 90 percent of all product categories being exported by Pakistan to the EU. The European Commission’s preliminary assessment is that Pakistani exports, including textiles, and also other products such as leather would increase by Euro 574 million annually. The Pakistani textile industry estimates that exports to the EU of textiles alone under GSP+ will increase by $650 million in the first year.
In 2012, the EU and Pakistan adopted a five-year Engagement Plan and launched a Strategic Dialogue, covering a wide range of issues from security, including counter-terrorism, non-proliferation and regional cooperation, to human rights, migration and development cooperation.
Our correspondents add: Prime Minister Nawaz Sharif congratulated the nation on the award of GSP Plus status to Pakistan.
“Award of GSP Plus status shows confidence of the international markets on the excellent quality of Pakistani products,” the prime minister said.
He said gaining access to the European markets was the top-most priority of the government as part of the economic development agenda, which has been achieved due to continuous and hard work of the ministers and officials of the ministries of finance, commerce and foreign affairs and friends of Pakistan in Europe.
“This status would enable Pakistan to export more than $1 billion worth of products to the international markets. Only the textile industry will earn profits of more than Rs1 trillion per year,” the premier observed.
Nawaz said an increase in exports would resultantly facilitate the economic growth and help in generation of millions of additional employments.
President Mamnoon Hussain in a statement said that the EU’s GSP Plus status would strengthen Pakistan’s trade relations with the member countries of the European Union. “GSP Plus would also significantly help strengthen our economy through greater trade, generation of economic opportunities and creation of more jobs for our people,” the president stated.
Finance Minister Ishaq Dar said the GSP Plus status will increase the country’s exports by at least $2 billion.
Addressing the Sustainable Development Policy Institute’s annual Sustainable Development Conference in Islamabad‚ he noted that a number of measures had been taken to fix the economy and the trust of international community on Pakistan was beginning to take roots.
The minister said even while austerity measures were being taken to bring down the deficit‚ the government had increased allocations for social safety nets to protect the poor.
Punjab Chief Minister Shahbaz Sharif said the grant of GSP+ was a good omen. He said the facility of GSP+ would enhance exports of Pakistan and the national economy would be strengthened due to an increase in trade activities.