Indian intransigence major hurdle in Pak-EU trade deal


Humanitarian crisis and war on terror
In 2010, Pakistan was hit by one of the worst humanitarian disasters in the world in the form of floods. According to reports by the government of Pakistan, these floods affected the lives of 20 million people, through destruction of their personal property, sources of livelihood and infrastructure, including a loss of approximately 2,000 human lives.
It is estimated that the combined damage to Pakistan’s economy in the wake of these floods total to around $43 billion. According to rough estimates by Pakistan cotton ginners association this natural calamity resulted in the destruction of 2 million bales of cotton which affected its international prices. These catastrophic floods also resulted in a massive loss of food production as 17 million acres of Pakistan’s most fertile crop land was submerged in water. Damage to agriculture was calculated at $2.9 billion, which included 700,000 acres of lost cotton crops, 200,000 acres of sugar cane and 200,000 acres of rice, in addition to the loss of 500,000 tonnes of wheat stocks. The extent of damage that these floods had on Pakistan’s economy has been far reaching. Not only were sources of livelihood of people destroyed, but entrepreneurs and businessmen from small cities were forced to live under open skies. While damage to Pakistan’s economy was enormous in the wake of floods, it does not happen to be the sole contributor towards the poor state of affairs of the local economy. In 2001, when Pakistan joined hands with the United States of America and the international community in the war on terror, the country had to bear the brunt of strong militancy movements who declared ‘jihad’ against the Government of Pakistan and its citizens due to the their alliance with the western forces.
Over the years, cross border insurgency in Pakistan has been on the rise with militants from Afghanistan crossing into Pakistan from the Balochistan and Khyber Pakhtunkhwa border area. They have inflicted huge losses not only on infrastructure but have also lead to a great loss of civilian lives. It is estimated that in the last decade Pakistan has lost more than 32,000 civilians in terrorist attacks along with 3,500 security personnel.
It is estimated that in the last decade Pakistan has incurred costs of $68 billion and in return has received a paltry amount of $17 billion in aid from the foreign community. While Pakistan has been playing an important role in being a valuable ally to the western countries in war on terror, its role is under consistent scrutiny and criticism, with Western powers claiming that Pakistan is not doing enough to eliminate terrorism.
It does not take a rocket scientist to figure out the link between poverty, deprivation and terrorism. Only sustained levels of economic growth can rescue people from this threatening cycle. However the massive cost of war incurred has only made development and empowerment all the more difficult to offer to the people, especially given the resource constraints that already exist in the face of these adversities.

Pak-EU relations
Given these tough circumstances, Pakistan Today had an exclusive interview with Pakistan’s ambassador to Belgium, Luxembourg and the European Union, Jalil Abbas Jillani, discussing with him, our relationship with the European states in the face of these resource constraints.
Mr Jillani has been closely involved with EU officials and members of the EU parliament in developing the economic and trade partnership between these countries and Pakistan. Prior to this appointment, Mr Jillani was Pakistan’s ambassador to Australia. His other appointments include DG South Asia, Foreign office spokesman, acting High Commissioner India and Minister at Pakistan’s embassy Washington DC.

Increased economic and trade cooperation
In our interview with ambassador Jillani, taking into account the volatile economic situation of Pakistan we asked him what steps were being taken by the foreign office to ensure increased economic cooperation and assistance from the European Union. At the outset he mentioned that EU-Pakistan relations have been growing at a rapid pace. EU has considered Pakistan as a strategic partner. The dawn of democracy in 2008, he said, provided an impetus to this relationship and it was agreed to hold EU-Pakistan summit level engagement. President of Pakistan, Mr Asif Ali Zardari visited Brussels for the first summit in 2009 and Prime Minister Mr. Yusuf Raza Gilani visited Brussels for the second time.
He said that in recognition of Pakistan’s sacrifices against extremism and Al-Qaeda, taking into account the economic losses suffered due to terrorism and devastating floods last year the EU leadership has decided to give Pakistan specific tariff concessions in the form of autonomous trade preferences under which 75 Pakistani products would benefit from duty free access to the European Markets. These Trade Concessions however require a WTO waiver. The EU applied for the WTO waiver in January. The waiver request enjoyed the support of 150 of the 152 members of WTO. India out rightly opposed it and Bangladesh expressed certain reservations demanding compensation.

Roadblock with India
In response to our question of what seemed to be the actual roadblock with India concerning this deal, Ambassador Jillani, said that in actual fact these proposed concessions have been essentially made by the EU for Pakistan and not for any other country. However while designing the package, EU adopted a win-win approach which is to say that they tried to ensure that there were little if any consequent commercial disadvantages for EU member states or other trading partners of the EU such as India. Incidentally India at no stage claimed that its trade with the EU will be disadvantaged with this trade package.
However, he said, that since these concessions were Pakistan specific and not available to all other WTO members on an MFN [most favoured nation] basis, therefore the EU was obliged to seek a waiver from the WTO. It is noteworthy he added that virtually all members of the WTO except India have indicated support for the waiver whereas India opposed it on grounds that granting of this waiver will set a wrong precedent for the WTO system as a whole for the future. Ambassador Jillani said that this so called justification by India was highly debatable because firstly the WTO system and law has the provision for a waiver precisely because it was visualised that there would be times when individual member countries would need to be given waivers to cope with extraordinary circumstances and the 2010 floods in Pakistan were globally acknowledged as such circumstances. Secondly the entire WTO membership with its collective wisdom does not perceive the so called threat to the WTO system that India has been talking about. This leads one to conclude that Indian opposition in this case is not on principle as it has claimed but it perhaps wants to extract some quid pro quo from Pakistan. Ambassador Jillani added that this attitude is not becoming of the biggest country in our region that has ambitions of global leadership, since it amounts to trying to profit at the expense of millions of flood affected people of Pakistan.
When asked if India was willing to strike a deal in this respect, Ambassador Jillani noted that they may be willing to strike a deal but chances are that they would want a disproportionately high price in return as their pound of flesh. “The Indian leadership at various levels in the past months have given positive signals in this regard but they have then not followed up on these indications,” said Ambassador Jillani.
EU collectively
approved trade package
Mr Jillani explained that the European Union member states following an internal debate gave their collective approval for this trade package last year. It was only after the approval that a European commission was authorised to apply to the WTO for a waiver. In the WTO, all 27 EU member states speak with one voice represented by a single EU ambassador he said. In reply to whether these concessions were being sought in a permanent capacity or if there was a timeline for these concessions, Ambassador Jillani said that these concessions would only be temporary and are intended for a 2-3 year period as abridging mechanism till 2014. This was due to the fact that in 2014 a new GSP scheme would come into effect where Pakistan would be well placed to benefit from duty free treatment under GSP Plus for a much larger number of products.
Taking into account economic instability of certain European states, we asked him if the austerity measures would affect their trade with Pakistan. Ambassador Jillani was quick to respond saying that on one level there was little likelihood of such an impact. This is because the maximum impact of European austerity would naturally be on the consumption and import of luxury and higher end products. Since the imports from Pakistan do not fall in this category therefore Pakistan’s exports to the EU were not expected to be adversely affected. On the other hand he added that these austerity measures have given rise to unemployment in Europe which has been forcing certain European countries to become more protectionist vis a vis imported products which compete with their domestic industry.

Pakistan relationship with NATO
Taking into consideration the centrality of Brussels with NATO, we asked him if this could possible have a fall out in our dealings with NATO, Ambassador Jillani said that while it was true that both EU and NATO are stationed at Brussels, they happen to be distinctly separate institutions with completely different functions. He said that both NATO and the EU have been equally enthusiastic about supporting Pakistan in its efforts to recover as soon as possible from the devastating effects of the 2010 floods. That is the reason, he said that NATO unambiguously encouraged the EU to offer Pakistan a trade package in addition to development aid and disaster relief assistance. He said that Pakistan has greatly appreciated this gesture of the EU in the trade arena and appreciates the fact that it is Indian intransigence rather than lack of interest in Brussels that has hindered the early implementation of the package. Hence Pakistan does not see reason to let this situation adversely affect its normal interaction with NATO or the EU in Brussels.

Criticism by Industrialists and Economists
Responding to criticism by leading economists and industrialists who blamed the foreign office and the government for not being able to secure the trade package Ambassador Jillani said, “Pak-EU relations have significantly improved after establishment of the current Government. Besides engaging in Strategic Dialogue, the two sides are engaged at the Summit level. Such high level engagement did not take place previously prior to 2008. Seeking EU trade concessions has been a priority for our President and the Prime Minister. The leadership believes that Pakistan can achieve progress by enhancing trade. Better trade will bring more investment, create jobs and help with economic development besides eliminating extremism.”
He added that it was with these objectives in mind that the leadership in Pakistan emphasized the imperatives of giving trade concessions to Pakistan and succeeded in its objectives. The EU has been sincerely perusing efforts to get a WTO waiver so that these trade concessions known as Autonomous Trade Preferences for Pakistan get implemented. India he said remains the only hurdle. “We are engaged with India at various levels and hope that it would modify its position and go along with the consensus that is emerging in WTO in favour of these concessions,” Ambassador Jillani explained, adding that the contention that India had secured these concessions was incorrect.

The writer is sub-editor, profit


  1. Ali this is absolutely brilliant, well researched, very concise and structured. Extremely mature article.

    Well done!

  2. Well, Ali Rizvi has done it again…. another superb well written article with detailed and pertinent research. I'm impressed.

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