LAHORE - Following the reduction of China’s share in the global textile and clothing trade coupled with the anticipated GSP Plus status for Pakistan by the EU in early 2014 Pakistan can earn an additional $700 million per year.

Industry sources said that China’s share in the global textile has been reduced by $30 billion to $270 billion due to rising cost of production.

They said that Pakistan is working to get the Generalized System of Preferences (GSP) plus status in January, 2014 from EU which will allow textile products greater access to those markets. In FY13, textile contributed 53 per cent to Pakistan total exports of $24.6 billion. Textile sector will gain as EU is likely to grant GSP plus status to Pakistan. Currently, any importer in EU who imports Pakistani textile products has to pay 11 per cent duty, which makes Pakistani products costly. GSP plus will allow almost 20 per cent of Pakistani exports to enter the EU at zero tariffs while a further 70 per cent will be allowed to enter at preferential rates.

The sole purpose of GSP scheme is to help poor countries by making it easier for them to export their products to EU at reduce tariffs. In 2004, the GSP regulation was simplified from five to three arrangements, including GSP standard, GSP plus and everything but arms & ammunition (EBA) in order to better focus on those countries which are most in need. The schemes will no longer end every three years, as it is the case now. Rather, it will last for 10 years which will give confidence to importers and exporters. The new GSP legislation has set enhanced monitoring of the conventions (every 2 instead of 3 years) and with scrutiny by the European Parliament.

Muhammad Tahir Saeed, a textile industry expert from Topline, stated that GSP plus is not extended automatically, countries have to apply and will be qualified if they meet the eligibility criteria. GSP plus is extended to countries considered ‘vulnerable’ in their trade profile: i) exports to EU are not diversified, ii) 7 or less items make up at least 75 per cent of their exports to EU, and iii) value less than 2 per cent of EU’s total GSP imports. Pakistan qualifies to apply for GSP plus under the vulnerability criteria. However, trade preferences will be suspended if average value of import of textile items by EU from Pakistan exceed 14.5 per cent of total EU imports over three consecutive years. 

GSP plus offers preferences over and above the standard GSP by covering roughly 70 more lines mostly duty-free. Pakistan is currently eligible for the GSP plus status and most likely will get the status in January, 2014. Whereas its neighboring countries like India, Bangladesh are holding GSP standard which offer partial reduction in tariff and Afghanistan has EBA status which allow it to export everything but arms absolutely duty-free and quota-free.

Tahir Saeed said that product mix of NML shows that garments and processed cloth contain almost 10 per cent and 40 per cent share in total sales of Rs52.4 billion in FY13, with 22 per cent and 14 per cent gross margins, respectively. NML exports comprises almost 77 per cent of total sales of Rs52.4 billion out of which almost 27 per cent goes to EU, so concessionary tariff from EU will bode positive impacts on the profitability of the company, especially value-added products.