Last updated on September 7th, 2023 at 11:41 pm
To go through this article, firstly we have to know what are GSP and GSP+.
The Generalized System of Preference or the Generalized Scheme of Preference, which is commonly known as GSP. It contributes to reduce poverty and the promotion of sustainable development and good governance. Tariff preferences in the EU market helps developing countries to participate more in international trade and get more export revenue to their own sustainable development and eradicate poverty.
The GSP+ is as like as standard GSP but it has some differences too. The special incentive arrangement for sustainable development and good governance, known as GSP+, which offers additional duty free exports to support vulnerable developing countries in their ratification and implementation of relevant international conventions in these fields.
The EU started considering the GSP status for Pakistan in October 2012, because the country was affected by a devastating flood in 2010.
The European Union (EU) has given the GSP+ facilities to three new countries including Pakistan from 1 January 2014 and it will end in 31 December 2016.
It should be mentioned that Bangladesh is getting this facility previously. China, Colombia, India, Indonesia, Thailand and Vietnam are not eligible for GSP+. China and India have graduated out of the textile and garments sections of the standard GSP that means whereby products import from China and India will not be benefiting from preferential duties either. From now, Pakistan is the new raising competitor for Bangladesh in textile and apparel sector.
A good number of orders have already been shifted to Pakistan from Bangladesh as the buyers or retailers have already known about the Pakistan’s GSP+ facility. Bangladeshi Garments sector was affected by the political deadlock. Retailers do not want to continue to work in a risky environment in Bangladesh and so Pakistan will be their next best choice as it can grow cotton. If Pakistan can impress them, they will not go to other destination.
The EU is the largest trading partner of Pakistan after the US. Pakistan exports around 3.4 billion Euros to EU every year. They export about 88% apparel and textile products. In the next two years their exports will increase near about 10%.
The total amount of export of Bangladesh to EU has risen to 11% in the first 5 months of 2014 whereas, Pakistani export has risen about 17%. During the period under review, in the exports of clothing and textiles, home textile sector fell by 3 percent in Bangladesh, where the Pakistan increased nearly 7 percent. Woven and knit apparel exports that grew by the Bangladeshi, Pakistani products grew by more than two. It seems that, Pakistan is taking advantages of GSP greater than Bangladesh. Bangladeshi textile and apparel sector have to face a little bit competition in the coming days. This pressure will be more on the home textile products.
Pakistani export can be raised up to 1.5 billion US dollar. Pakistan will export that amount; about 70 percent may be through its trade creation. This directly will increase the volume of Pakistani exports. Rest 30% will be through trade diversion. This will be happened by decreasing trade of Chine and increasing trade of Pakistan. Besides, the export of Turkey, Bangladesh, India and Sri-lanka will decrease a little bit and will add with Pakistan.
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