A presentation on EU GSP Plus:

Opportunities for Pakistan

Pakistan Institute of Trade and Development, Islamabad.

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Scheme of the Presentation: (Contnd)

IntroductionQualification CriteriaPakistan’s Position under Qualification

CriteriaList of GSP+ beneficiary countriesPakistan’s Export Profile to EUSectoral Coverage under GSP PlusPotential for Pakistan’s Exports under

GSP Plus along with tariff rates vis-a-vis other countries

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Key AdvantagesRules of origin in EURequired Standards and Regulations in EU

Opportunities for PakistanGSP+ Challenges Sector Specific Challenges

Scheme of the Presentation:

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Introduction: (Contd)

GSP+ is a scheme of preferential tariffs, unilaterally extended with the objective of increasing trade capacity among developing nations.

The EU GSP is extended through three arrangements: GSP, GSP Plus and Everything But Arms (EBA).

GSP+ is not extended automatically, countries have to apply and then it is subject to the EU Parliament’s approval under the given eligibility criteria which is binding on the requesting state.

The EU Parliament passed the Scheme and final count of voting was 409 in favor and 182 against.

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Introduction:

Government of Pakistan through its diplomatic and trade circles made intensive efforts to get this legislation passed through EU Parliament

Under GSP Plus, 6274 tariff lines are eligible, of which 6269 are duty free. Textile products are classified as “sensitive” (HS Code chapters 50-60 and 61-63) under GSP Plus.

GSP Plus will result in duty free access in EU for 91% of its total imports

GSP Plus beneficiaries must ratify and implement 27 international conventions. click here

GSP Plus status will be awarded for a period of 10 years and its status is reviewed after every three years.

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GSP Plus: Qualification CriteriaTariff preferences are conditional to commitments for

ratification and implementation of 27 international conventions * (16 relating to human rights and labor rights (11 relating to governance and development issues).

GSP Plus is extended to countries considered “vulnerable” in their trade profile.

Share of seven largest GSP sections: For exports to the EU, the share of top 7 sections should be greater than 75% of the total exports of that country to EU

Share in the total GSP imports to the EU: In order to remain eligible for GSP Plus the share of total imports from one country to EU should not be more than 2% of the total imports of EU.

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Pakistan’s Position under Qualification Criteria

GSP + criterion Pakistan’s position

The exports of beneficiary country for seven largest sections should be greater than 75%

94.6%

Per capita income to be less than US$ 4000 (Not to be high middle income country)

US$ 1,260

Import Vulnerability threshold (2%)

1.60%

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List of GSP+ beneficiary countries

Armenia Azerbaijan Bolivia Cape Verde Costa Rica Ecuador

Pakistan Mongolia Paraguay Peru Georgia

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Pakistan’s Export Profile to EU

The total Pakistani export to the European Union in 2013 was US$ 6.58 billion.

Total imports of EU-27 countries in 2012 was US$ 5.71 trillion.

Pakistan has been struggling to improve its exports to the EU as compared to other developing countries.

Grant of GSP Plus status is a significant development and big opportunity for Pakistan to enhance its exports to EU.

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PAKISTAN-EU BILATERAL TRADE YEAR

EXPORTS (US $

MILLION)

IMPORTS (US$ MILLION)

TRADE BALANCE (US$

MILLION)

2001-02 2,770.50 2,050.80 719.70

2002-03 3,066.80 2,049.00 1,017.80

2003-04 3,726.90 2,390.80 1,336.10

2004-05 4,073.40 3,138.80 934.50

2005-06 4,247.70 4,966.80 (-) 719.10

2006-07 4,627.30 4,756.50 (-) 129.20

2007-08 5,185.40 5,222.00 (-) 36.60

2008-09  4,412.40 5,645.40 (-) 1233.40

2009-10 4,599.54 4,542.32 57.22

2010-11 6,181.00 4,383.90 1797.10

2011-12 5,358.42 4,518.46 839.96

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Sectoral Coverage under GSP Plus:

The GSP+ provides tariff concessions in 6200 plus tariff lines. These products fall in the following sectors:Agricultural Products Mineral Products Chemical and Related Products Non - Consumable Animal and Plant Products Textiles and Apparel Non - Metallic Mineral Products Metals and Manufactured Articles Made Mostly of

MetalOther Highly Manufactured and Special - Purpose

Goods

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Chapters covered under GSP Plus with Pakistan’s exports and tariff

Pakistan’s Exports to EU for Chapters covered under GSP Plus is US$ 5.27 billion and chapter wise tariff and Exports are given. Click here

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High Potential Chapters for Pakistan covered under GSP Plus (MFN tariffs are above 15%)

      All Values in USD Million

   Top three competitors

S. No Product code Product label Pak's Exports to EU in 2012

EU's total Imports in

2012

Total ad valorem

equivalent tariff

Peru's Exports to EU

in 2012

Ecuador's Exports to EU

in 2012

Costa Rica's exports in

2012

1 '04Dairy products, eggs, honey, edible 

animal product nes 0.05 39817.05 38% 0.16 0.00 0.00

2 '02 Meat and edible meat offal 0.07 45853.05 38% 0.00 0.00 0.00

3 '17 Sugars and sugar confectionery 9.97 15386.19 34% 0.89 3.61 3.89

4 '24Tobacco and manufactured tobacco 

substitutes 4.12 18238.76 29% 0.74 14.39 0.15

5 '20Vegetable, fruit, nut, etc food 

preparations 8.79 26084.93 22% 231.95 75.57 99.55

6 '01 Live animals 0.00 10156.67 22% 0.08 0.00 0.00

7 '11Milling products, malt, starches, 

inulin, wheat gluten 1.42 5266.70 20% 2.53 0.44 0.01

8 '10 Cereals 67.87 23514.88 16% 14.93 0.98 0.00

9 '16Meat, fish and seafood food 

preparations nes 0.90 20564.35 16% 36.31 525.58 0.48

10 '07Edible vegetables and certain roots 

and tubers 5.31 26154.46 15% 164.29 26.37 24.02

Total 98.50 231037.02 451.88 646.94 128.10

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Considerable Potential Chapters for Pakistan' covered under GSP Plus

32 chapters covered under GSP Plus where MFN tariff ranges from 5% to 15% and Pakistan is tapping the EU market of US$ 3.74 billion. Where as the total EU imports of these chapters are of US$ 1.39 trillion. The list of trade, tariff and competitors for these chapters can access here

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Average Potential Chapters for Pakistan covered under GSP Plus

45 chapters covered under GSP Plus where MFN tariff ranges from 0% to 5% and Pakistan is tapping the EU market of US$ 1.42 billion. Where as the total EU imports of these chapters are of US$ 3.62 trillion. The list of trade, tariff and competitors for these chapters can access here

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Key Advantages of GSP Plus:

The scheme will no longer end every 3 years,. Rather, it will last for 10 years.

Better focus on those countries most in need

By getting preferential access to the Union market, the scheme will assist developing countries in their efforts to reduce poverty and promote good governance and sustainable development

The scheme’s tariff preferences should focus on helping developing countries having greater development, trade and financial needs.

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Rules of Origin under in EU under GSP+

Products originate in a particular beneficiary country if they are: - wholly obtained in that country, or - sufficiently worked or processed there.

In general terms, products are wholly obtained in a particular beneficiary country (or in the EU, in the case of bilateral cumulation)

Globalization of manufacturing processes has resulted in many products being made from parts, materials etc. coming from all over the world. Such products are not of, course, wholly obtained but they can nevertheless obtain originating status.

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Rules of Origin in EU under GSP+

WHAT IS THE EU GSP PROOF OF ORIGIN? There are three principal forms of proof used in the context of the EU GSP:

I. The certificate of origin Form A, used as proof of origin at import into the EU and in regional cumulation

II. The Invoice Declaration, and which can be used for low value GSP exports

III. The Movement Certificate EUR, which may be used as may an invoice declaration, when goods are exported to beneficiary countries from the EU in the context of bilateral cumulation

HOW ARE THESE DOCUMENTS USED? The Form A and invoice declaration are used by importers in the EU for GSP

imports as evidence in support of their request that the goods be imported at preferential rates of customs duty.

They are therefore important documents and have a value equal to the amount of customs duty that is waived by the EU.

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 European Union Standards

Registration, Evaluation and Authorization of Chemicals (REACH): REACH requires all chemicals produced or imported into the EU in volumes above 1 ton per year to be registered.

CE Marking: To sell certain products in the 28 EU member states, as well as in Norway, Liechtenstein, Switzerland, Turkey and Iceland, U.S. exporters are required to apply CE Marketing whenever their product is covered by specific product legislation. 

EU Flammability Requirements: There are no harmonized EU flammability requirements for home and house textiles.

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 European Union Standards

Product Liability and Product Safety: The General Product Safety Directive (GPSD) aims to ensure that products placed on the market are safe, and places the obligation to place only safe products on the market on producers and to some extent on distributors.

Biocidal products: Whenever biocidal products are added to textile and apparel products to give them specific properties (e.g. repel insects or avoid allergens) the provisions of the Directive 98/8/EC must be followed.

Emission Trading System (ETS): The European Emission Trading System aims to improve and extend the greenhouse gas emission allowance trading scheme of the Community.

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 Testing and Certification Mechanism in Pakistan

Pakistan National Accreditation Council (PNAC) has achieved a milestone of Mutual Recognition Arrangements (MRAs) with International Laboratory Accreditation Cooperation (ILAC) and Asia Pacific Laboratory Accreditation Cooperation (APLAC).Now Pakistan is included in the list of countries having equivalence status for accreditation of testing and calibration laboratories all over the world.Accredited In Pakistan, Accepted Everywhere In

The World can access here

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Opportunities for Pakistan (Cntnd…)

Pakistan can earn more than USD 1 billion worth of goods by expansion of product lines through the GSP Plus duty-free status.

Competitors in the T&C sector; China, India, Vietnam, Thailand, Indonesia have no duty free access as well as no preferential access – 10% to 14% duty advantage.

In chapters 61 and 62 (knitted and woven apparel), an additional US$280 million can be earned in the first year (13.5% of current exports of products within the 6% threshold.

In leather products (chapters 41 & 42), an additional US$97.1 million (17.5% of existing import levels) in the first year can be earned.

For all other products, an additional US$ 250 million in the first year (17.5% of current exports) can be earned.

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Opportunities for Pakistan

Massive opportunities to provide employment due to increase in exports.

Increased revenue for the exchequer in form of taxes from enhanced trade opportunities.

Massive possibilities to earn foreign investment by inviting entrepreneurs from China and other countries to invest in industries with potential for rapid export expansion through GSP Plus.

China’s dwindling share in the global textile and clothing business, because of surging cost of production there, and Pakistan’s expected duty-free access to the European Union (EU) from next year, are being viewed by the textile industry as a ‘once-in-a-lifetime’ kind of opportunity for the country.

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Challenges…Pakistan has been a large supplier of textile and leather

goods to the EU for long time but quality control and product standards remain a concern

Product concentration in textiles and clothing sector and leather sector

The key challenges to increasing Pakistan’s exports to the EU are found to lie primarily within the border. Which include costs of production lower productivity volatile prices of raw materials in the textiles and plastics

sectors difficulty in achieving the required market standards costs of certification lack of customer confidence due to the poor security

environment

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GSP Plus: Sector Specific Challenges

Textile sectorVoluntary Social Standards (VSS) are

compliance challenge for manufacturers and exporters

Quality standards and certification Oeko-Tex 100 certification is awarded in four

product classes only textile items for babies textile items for babies textiles used away from the skin furnishing materials

Increasing demands for the EU Eco-Label

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GSP Plus: Sector Specific Challenges

Tanneries and leather sectorNTB, Product standards are imposed on HS

4201, HS 4202, HS 4203.Lack of harmonization at the HS 8 digit level

in leather goods and garments sectorsMaximum Residue Levels (MRLs) standards Labor and environment related standardssocial accountability standards

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GSP Plus: Sector Specific Challenges

Plastic sectorLack of production compliances Testing and certification facilitiesCosts of complianceHeath Safety and Environment (HSE) and

Occupational Health and Safety (OHAS)

Frequent Asked QuestionsClick here for FAQ’s

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Thank You