EU asked to cut tariffs for Pakistan's textile exports

From A Correspondent
Filed on February 12, 2006

ISLAMABAD Prime Minister Shaukat Aziz's government has asked the European Union (EU) to cut tariffs for Pakistan's textile exports preferably during the financial year 2005-06.

"Pakistani textile exports are subject to one of the highest tariff rates," says a new report of the Planning Commission urging the EU authorities to review their high tariffs for Pakistan.

Average applied tariffs on clothing products are even larger at 45 per cent for Pakistan and India. Indeed these over and above tariffs applications are greatly hampering Pakistan's exports to developed countries, the report further regretted.

The report also fears that Pakistan will have to rely on foreign resources if domestic fiscal effort remains muted due to the likely impact of high oil prices on inflation.

The report warns that higher oil prices in the medium term could eventually create problems for Pakistan, like many other developing countries, especially those who were not categorised as Highly indebted Poor Countries (HIPC). The report also said that in an environment of higher interest rates, once again the goal of debt sustainability is partly compromised. Thus either the pace of foreign exchange earnings must continue to rise via unhindered exports and/or be financed by depletion of foreign reserves to maintain debt sustainability.

The report said that if Pakistan is to realise the potential of international trade to enhance economic growth to achieve MDGs, the main barriers to its exports would need to be removed. These include tariffs imposed by developed countries on imports and the subsidies that developed countries provide to their domestic agricultural producers.

Though over the last one and half decade, developed countries imports into Pakistan have been liberalised in terms of lower tariffs and other non tariff barriers, Pakistan's exports continue to face various forms of trade restrictions from developed partners.

Textile exports are broadly divided into quota exports to US, EU, Turkey and Canada and into Non Quota exports. In recent years, quota exports have increased especially to EU because of enhanced quota allocations and quota utilisations.

According to European Commission studies, significant tariff and non tariff trade barriers still exist and that the market opening by the EU's trade partners is very slow and insignificant. The average tariff for textile and clothing products under the WTO is 9 per cent, while average applied tariffs for textile products by countries such as Argentina, Brazil and Thailand range between 20 per cent and 25 per cent and are 38 and 39 per cent for India and Pakistan.

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