EU Market Access & Regional Peace

1. EU Market Access & Regional Peace May 10, 2012

2. Pakistan Business Council: Who we are? • PBC is a non-political, private sector funded not-for-profit business policy advocacy platform. Established in 2005, as a Section 42 Company • Objectives are to: • Improve the general business climate, with pragmatic implementation of international/regional best practices • Improve the competitiveness of Pakistani industry. • Help Pakistani companies integrate in regional and international markets • Further the economic, social and human resource development of Pakistan • At PBC, we view Government as a partner

3. PBC Members - Pakistan’s Marquee Brands

4. PBC Composition by Sectors of theEconomy

5. PBC Members’ Contribution to the Economy

6. Why are we here today? • We are here to seek the Trade Counselors' & the Commission's support for greater and a more secure long term access for Pakistani goods and services to the EU markets. • We appreciate that at the moment the EU may not be in a position to give Pakistan specific concessions • PBC however firmly believes country specific concessions only hamper competitiveness of partner country’s industry in the long run. • PBC WOULD LIKE YOUR SUPPORT FOR ENSURING A LEVEL PLAYING FIELD FOR PAKISTANI INDUSTRY. NOTHING EXTRA – SIMPLY THE SAME TERMS OFFERED TO THE EU’S OTHER TRADING PARTNERS.

7. First the hard numbers

8. Pakistan’s GDP Growth Rate is lower than that required to create employment opportunities for an increasing youth population Source: International Monetary Fund (www.imf.org/external/data) and calculations

9. The “War on Terror” has affected Foreign Direct Investment Source: World Bank Development Indicators (data.worldbank.org)

10. With stagnating growth rates and lack of investment, a current account balance crisis threatens Source: International Monetary Fund (www.imf.org/external/data)

11. Pakistan has been unable to export itself out of poverty! • Major trading partners – EU & USA – have mostly restricted market access for Pakistani exports. • Diversifying export products & markets not possible in near to medium-term. Majority of the population has low education & skill levels – ideal for textiles and agro products. Textiles will continue to be the major export item for Pakistan. • EU measures in the past were mostly short term and do not allow companies to fully exploit the concessions.

12. While Pakistan’s exports stagnate, competitors continue to do well in the EU

13. Textiles however continue to be the major component of Pakistan’s exports

14. The global textile and clothing scenario.

15. Global Trade in Textile & Clothing (Yarn & Fabric) Export Textiles 2000 – 2010- top 13 countries Billion USD Source: WTO, International Trade Statistics

16. Global Trade in Textile & Clothing Export Clothing 2000 – 2010- top 13 countries (minus China, Hong Kong & Extra-EEU) Billion USD Source: WTO, International Trade Statistics

17. Global Trade in Textile & Clothing Export Clothing 2000 – 2010- top ten countries Billion USD Source: WTO, International Trade Statistics

18. Global Trade in Textile & Clothing Export Textiles & Clothing 2000 – 2010- top 13 countries (without China, Hong Kong and Extra-EEU) Billion USD Source: WTO, International Trade Statistics

19. Global Trade in Textile & Clothing Export Textiles & Clothing 2000 – 2010- top ten countries - Billion USD Source: WTO, International Trade Statistics

20. Major Investments in the World Textile Sector Pakistan’s capacity is not keeping pace

21. ITMF‘s Textile Machinery Shipments Statistics Shipped Short-staple Spindles 2002 - 2011- World & Regions - million spindles + 7%

22. ITMF‘s Textile Machinery Shipments Statistics Investments in Short-staple Spindles 2011 - 5 Biggest Investors million spindles

23. ITMF‘s Textile Machinery Shipments Statistics Shipped Shuttle-less Looms 2002 - 2011- World & Regions Looms + 43% 2010 & 2011: 19 instead of 14 Chinese producers

24. ITMF‘s Textile Machinery Shipments Statistics Investments in Shuttle-less Looms 2011- 5 Biggest Investors Looms

25. ITMF‘s Textile Machinery Shipments Statistics Investments in Circular Knitting Machines 2011- 5 Biggest Investors Machines

26. China dominates the textile sector But changing Chinese demographics will reduce China’s long term impact

27. China‘s Textiles Export in the World Market Leading exporters of textiles, 2010 • Figures from WTO show that in 2010, China’s textile exports covered 30.7% of the world’s total textile trade, 20.3 percentage points higher than in 2000. • In 2010, textile exports from India and Vietnam grew 41% and 32%, faster than China (29%). • Textile exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in world’s total is still higher than China. Source: WTO

28. China‘s Garment Export in the World Market Leading exporters of garment, 2010 • WTO figures show, China’s garment export covered 36.9% of the world’s total in 2010. • In 2010, China’s garment export grew slower than Bangladesh, Vietnam and Malaysia. • Garment exports of EU (27) and extra-EU(27) from 2000 to 2010 presented a declining trend, but the share in world’s total is still close to China. Source: WTO

29. As China prepares to move out of the lower end – the EU moves the goalpost for Pakistan

30. New Rules for LDC exports to the EU • From January 2011, garments from LDCs made of IMPORTED FABRICS will get the GSP under a new rule. That is, ONE STAGE PROCESSING (fabric to garment) is the only requirement to qualify for GSP benefit. • Single stage rule is applicable ONLY TO THE LDC beneficiary countries including Bangladesh which already has a strong presence in the global textile market.

31. Pakistan’s case

32. The case for preferential market access for Pakistani exports into EU • Out of around 60 countries classified as low income countries, only Pakistan, Vietnam & India do not get zero duty on their exports to EU. The rest get zero % duty on their exports to EU by way of: • Everything But Arms preference to LDC (least developed countries) like Bangladesh, Nepal, Afghanistan etc. • GSP+ preference to vulnerable countries like Sri Lanka (Sri Lanka’s status temporarily withdrawn in 2010) • FTA (Free Trade Agreement) with select countries like Egypt, Mexico, Chile, Southern African Development Community, Tunisia etc.

33. The case for preferential market access for Pakistani exports into EU • Amongst regional competitors, Pakistan and India face the highest tariffs (both are restricted to GSP preference). • India’s economy though is much bigger and growing at a faster pace than Pakistan’s economy. India’s GSP eligible exports to the EU were 10 times those of Pakistan in 2010

34. The case for preferential market access for Pakistani exports into EU • Pakistan is a ‘vulnerable’ country as defined by the EU. Source: UNCTSD and calculations

35. The case for preferential market access for Pakistani exports into EU • Additionally: • Pakistan is ranked at 142 in the HDI (Human Development Index) by UN, below Vietnam and India. • EU has initiated FTA talks with India which will lead to zero duty status to many Indian exports shortly. FTA talks with Pakistan is put on the second stage • Pakistan, we feel, is being penalized for having an open economy

36. The case for preferential market access for Pakistani exports into EU • And finally: • Among countries having exports of less than 2% of total EU imports, Pakistan is the only country besides Vietnam which does not have zero duty status.

37. So what can potentially happen if the EU provides Pakistan preferential access to its markets?

38. Potential impact of greater access to Pakistan to the EU markets • In the near term, not much – maybe $300 - 500 million increase in exports per year. • Mainly due to: • a lack of investments in the value added sector. • Because of the War on Terror buyers & their designers are not willing to come to Pakistan. • Chronic power shortages which are likely to continue in the medium-term. • Existing commitments of Pakistani exporters.

39. Not a major impact – but still important

40. Not a major impact – but still important • A clear signal that Pakistan is viewed as an important partner by the EU. • An economically vibrant Pakistan is in the interest of the world. • Investments including FDI will flow into Pakistan, especially in the textile & agricultural sector. • In the medium-term provide fiscal space to the GoP to allow spending on infrastructure and social welfare projects.

41. How can you help?

42. What support are we looking for from the Trade Counsellors? • Pakistan’s is a unique case – we would like the EU to include it in the list of First Stage countries for an FTA with the EU. • In the meanwhile, we suggest that the EU/GoP/PBC work together to ensure that the Pakistan government is able to submit in time the application for GSP+ status • Trade counselors are requested to work to create goodwill to ensure final legislation for GSP+ preference does not restrict Pakistan (import share threshold of 2%)

43. What support are we looking for from the Trade Counsellors? • PBC & European Union to ensure the relevant treaties / conventions are ratified • PBC’s access to top government figures could be utilized to make sure the relevant treaties / conventions are ratified and commitments are made for monitoring and reporting the implementation of treaties. • Counselors work with their governments to allow Pakistan a longer timeframe for implementation of certain controversial treaties for which additional ground work is required. • Any other suggestions are welcome.

44. THANK YOU