BRUSSELS (Agencies) – European Union leaders agreed on Thursday to grant limited trade concessions to Pakistan to help it overcome the impact of devastating floods and maintain political stability.
Pakistan will receive an ‘immediate and time-limited reduction’ in duties on key exports to the European Union, taking into account industrial sensitivities in the EU, notably on textiles, they said.
One diplomat said the arrangement would be worth around 300 million euros ($390m) to Pakistan over a year.
The details will be worked out by the European Commission, the EU executive, in coordination with the World Trade Organisation to avoid the concessions violating international trade rules and aggravating other EU partners such as India, Sri Lanka and Bangladesh.
The European Union has agreed to temporarily waive World Trade Organization tariffs on key Pakistani imports to help boost the flood-devastated countryÂ’s economy, British Prime Minister David Cameron said Thursday.
“There is a humanitarian crisis in Pakistan, there are also clear and very worrying concerns about what can happen in Pakistan with all that is going on, and all the dangers that everyone is aware of,” Cameron said.
“I believe this was a test for the European Union to make sure that when we talk about our external relations we can show we can deliver results and not just rhetoric,” Cameron told reporters.
The EU also agreed to look at granting Pakistan a favoured trading status with the EU after 2014, Cameron said.
“There is a deal done,” the diplomat said, adding that it included a commitment to grant Pakistan access to the EU’s enhanced trade programme, known as GSP+, by 2014, provided it meets criteria on good governance and human rights.
The block’s executive, the European Commission, has ‘reached an agreement on a proposal for 13 tariff lines’ which could have their tariffs temporarily suspended, Trade Commissioner Karel De Gucht told journalists after talks with EU trade ministers. That is allowed under WTO rules. The exact tariff lines under debate are currently a carefully guarded secret.
“The European Council underlines its firm commitment to grant exclusively to Pakistan increased market access to the EU through the immediate and time-limited reduction of duties on key imports,” a statement by the 27 EU leaders said.
“The European Commission is invited to explore options with WTO partners and present finalised proposals in October, taking into account industrial sensitivities in the EU.”
The European Union has been pressing for weeks to try to agree better trade terms for Pakistan to help it overcome the impact of the floods, over and above the emergency food and other aid it has already sent to the country.
Britain and Germany had pushed hard for a deal, but France, Italy and others EU states with domestic industries that compete with Pakistani imports such as linen, garments and ethanol, were reluctant to give too much ground at a time of economic stress.
The deal would result in a trade ‘waiver’ for Pakistan, similar to the one Islamabad received after the Sept 11, 2001 attacks on the United States in recognition of its role as a frontline ally in the battle against militants.
The discussion was complicated by trade rules and the possibility that tariff reductions granted to Pakistan could benefit China and India. “We want to help Pakistan – but only Pakistan,” said one Italian diplomat.
The EU is hoping that by discussing concessions with the WTO and trade partners ahead of time, it will prevent countries such as India filing lawsuits with the WTO against the move.
Since trade disputes take a long time to be settled, time-limited concessions should deter opponents from making legal challenges.
“If you want to stabilise Pakistan in the long run so that it does not drift away to extremism or fundamentalism, you have to make sure that the medium- and long-term consequences of the catastrophe will be countered economically,” German Foreign Minister Guido Westerwelle told reporters this month.
Pakistan has long coveted GSP+ status, but does not qualify as its economy is too large, with exports to the EU worth 3.02 billion euros ($3.84 billion) in 2009, and because it has not met accompanying human rights and governance criteria.
Earlier, the European Union agreed a vast trade deal with South Korea, saying it was the first link in a process which would ‘bind’ Europe to Asia.
The deal is the first such trade pact between the 27-member EU and an Asian country, and was presented as a pace-setter for similar agreements with India and other regional powers.
Belgian Foreign Minister Steven Vanackere, whose country holds the European Union’s rotating presidency, hailed the deal as the ‘most ambitious agreement ever’ after Italy dropped its objections at an EU summit in Brussels.
The deal will be formally signed at an EU-South Korea summit in Brussels on October 6, Vanackere said. The agreement must also be ratified by the European parliament.