European Union trade concessions package: technical problems

Karachi: Pakistan Readymade Garments Manufacturers & Exporters Association PRGMEA says Bangladesh’s opposition to proposed European Union EU trade concessions package of 75 items to Pakistan “seems to have no basis as it has insignificant exports to EU in home textiles.”

EU package announced in September 2010 after devastating floods in Pakistan is pending at World Trade organization WTO level for a year due to objections by India, Bangladesh, Brazil, Peru & Indonesia. India withdrew its objections but Bangladesh is blocking EU decision to give trade concession to Pakistan for three years from 2012 saying aid and trade should not be mixed up and trade concession to Pakistan might hamper Bangladesh garment exports to EU. Under WTO rules, necessary consensus is required from all WTO member states to pass package. Any member may raise objection without specifying any reason for it and till time all member states do not unanimously concur, it cannot be passed.

PRGMEA press release Thursday said Bangladesh has virtually no exports in cotton yarns, fabrics, polyester, synthetic yarns, cotton fabrics which constitute bulk of EU package. In seven textile items on which quotas are proposed Bangladesh had only Euro 179 million exports which is less than 3% of its total exports to EU.

Bangladesh’s export to EU in 2010 was nearly Euro 6 billion while Pakistan’s garment exports less that Euro 1 billion. In 23 garment categories of package, Pakistan had significantly lower average unit price than Bangladesh signifying Pakistani exporters are targeting different market segments than their competitors in Bangladesh.

EU based package on 75 items under Harmonized System HS Codes which is very complicated. HS codes are not taken seriously by exporters or customs authority and wrong HS codes are usually put on export documents. But this is not limited to Pakistan; HS codes are also not taken seriously by European importers. PRGMEA research shows many leading EU buyers of garments are using wrong HS codes on their purchase orders.

Another problem with HS codes is that, Pakistani authorities use different HS Codes. EU uses different codes for many products. For example, EU included HS Code # 62046231 (ladies jeans) in package but same code is not recorded by Pakistan Customs. It implies solely have to rely on data released by EU and data recorded by Federal Bureau of Statistics Pakistan is of no help. There is no way to estimate actual exports of certain items on which ceilings are proposed.

PRGMEA says to further compound situation, EU imposed ceilings/ quotas on eight major items in package. If ceilings are surpassed then normal import duty structure will be applied. It set ceiling of 7,571 tons on ladies jeans for 2012 & 13. This implies there is no room for growth for two consecutive years. Certain leading EU buyers already increased their buying in these products to build capacities ahead of package approval.

Proposed ceilings/ quotas are unrealistic. Ladies jeans, number one item for woven garment industry, export ceiling has been set at 7,571 tons. If based on average garment weight of 700 grams per piece, production comes about 9.46 million pieces/ year, which is equivalent to performance of a big denim jeans factory. Pakistan is exporting far more than this quantity.

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