Brussels, 07/10/2010 (Agence Europe) - Responding to the request from the European Council of 16 September, the Commission, on Thursday 7 October adopted a trade aid package for Pakistan, whose economy was severely hit by unprecedented flooding in August of this year. The action, which comes in addition to a €320 humanitarian aid package, is a first in the history of the common trade policy.
The draft regulation tabled by the Commission proposes the unilateral suspension of Community customs duties on Pakistan's key exports. The proposed preferences will liberalise 75 tariff lines on imports from Pakistan accounting for 27% of its current exports to the EU. This, the Commission says, will increase EU imports from Pakistan by about €100 million annually, compared with 2009. Given the nature of Pakistan's industrial and export base, a large number of the products for liberalisation are from the textile and clothing sector (65 tariff lines). Three footware and six leather tariff lines will also be suspended. The proposed initiative will also help ethanol, an agri-industrial product, with the regulation providing for an annual tariff rate quota of 100,000 tonnes based on past imports.
The Commission will now submit its proposal to EU member states, before submitting a waiver request to the WTO to gain the approval of member states. This move by the EU might very well be blocked by some WTO members, competing with Pakistan on the Community market. DG Trade says that it has already begun negotiations with India, Pakistan's main competitor. The Commission says that key Pakistani exports had been selected, with account being taken of the potential effect on India and the least developed countries (LDCs). The Commission says, too, that it took pains to limit the possible impact of the initiative on European industry as much as possible. Trade Commissioner Karel De Gucht said the impact would be “limited”. The member states most likely to be affected, Italy and Portugal, have extended their red lines. Thus tariff lines on household linen (sheets, quilt covers and pillow cases), where Pakistan is the EU's main supplier (75% share of the market) are unaffected.