EDITORIAL: The visiting European Union Special Representative for Human Rights Olof Skoog in an exclusive interview by a section of the independent press warned that the stakeholders must not take GSP Plus status for granted and expressed serious concern over military courts, and the freedom of expression, adding that he had conveyed this message to the civilian and military establishment.
This warning must not be taken lightly as Pakistan has benefited considerably since it was awarded the GSP Plus status in 2014 but only after it ratified 27 international conventions and committed to implementing them.
Time and again, Pakistan has passed laws that are in conformity with international best practices; however, their passage is invariably linked to multilateral or bilateral lending conditions with implementation remaining weak.
As per the European Commission website, GSP Plus gives a special incentive to eligible countries to pursue sustainable development and good governance in four areas – human rights, labour rights, environmental standards and good governance – in return for European Union cuts in import duties to zero on more than two-thirds of tariff lines of their exports.
Pakistan is an eligible country and the last published report on Pakistan jointly prepared by European Commission and European External Action Service dated 21 November 2023 acknowledged that “Pakistan’s progress on the legislative front while emphasising the need to improve practical application in both letter and spirit.”
The report further notes that the GSP Plus “grants Pakistan zero-rated or preferential tariffs on nearly 66 percent of tariff lines, enhancing the country’s ability to export to the EU market.
GSP Plus has proven to be pivotal for EU-Pakistan bilateral ties. From 2014 to 2022, Pakistan’s exports to the EU increased by 108 percent and the total trade volume increased from Euros 8.3 billion in 2013 to Euros 14.85 billion. Pakistan’s garments, bed linen, terry towels, hosiery, leather, sports and surgical goods and similar products enter the EU market availing GSP Plus concessions.“
Subsequent to this report’s publication the then EU Ambassador to Pakistan Kionka noted that “the full potential of GSP Plus benefit can only be realised by diversifying Pakistan’s exports to include more value-added products,” a plea that has been made by multilateral lending agencies with the ongoing International Monetary Fund programme’s staff-level agreement documents where the advice was that “reforms to the tariff schedule should reduce complexity and avoid the use of tariffs to promote industrialisation and protect sectors unable to compete of be self-reliant, as such policies weaken exports, hinder participation in global value chains, and incentivise rent-seeking.
Trade policies aimed at promoting specific domestic sectors, including export subsidies and local content requirements, should be discontinued as they are likely to promote resource misallocation and may violate international obligations.
The authorities should remain focused on reducing trade-weighted average tariffs and simplifying import/export documentation processes.“
It is extremely disconcerting that ten years after the GSP Plus status was granted to Pakistan our exporters remain as dependent on these incentives as in 2014 and with the cessation of fiscal and monetary incentives extended to exporters as per the ongoing IMF programme the demand for their reintroduction is gathering momentum.
While there is overwhelming evidence that inputs of our manufacturing sector are more than double the regional average with the discount rate at 12 percent and electricity tariff far higher than in regional countries yet what is fairly evident is that the stakeholders can no longer mollycoddle the industrial sector at the cost of the general public through sustained heavy reliance on indirect taxes (whose incidence on the poor is greater than on the rich) and minimal budgetary outlay on physical and social sector infrastructure development – a policy thrust that is no longer possible, given that our poverty levels are at a high of 41 percent.
Copyright Business Recorder, 2025
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