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Nov 20, 2010

India to oppose EU for granting duty-free access to Pak textiles

As European Union has granted a duty-free access to Pakistan’s textile products with an intention to help the country recover from the effects of massive floods, India is likely to stand against this decision for the reason that, it may make India’s exports to EU uncompetitive.

As this preferential treatment comes into effect from January 2011, several textile items from Pakistan would enjoy duty-free access to all the 27 countries of the EU for the next three years.

Granting of such duty-free access to a particular country is very much opposed to the WTO’s principle of the General Most Favoured Nation Treatment, and thus India is likely to oppose the same.

Though, some of the authorities are of the view that, India’s opposition may not prove to be substantial, because WTO does not have any significant laws or rules to stop any of its members from granting such preferential tariffs, and more so because EU has revealed its intent to solicit relevant waivers.

Further, the WTO is not authorized to interfere in any such matter unless a country implements a measure, like the one involving an import quota, wherein imports from some countries would be allowed while imports from other countries would be restricted.

The only option left with India is to speed up the process of finalizing its preferential trade agreement with EU, so that it too can enjoy duty-free access there.

EU initiated autonomous trade preferences for Pakistan in October on an emergency basis so as to help the country to restore from effects of massive floods in earlier part of the year. It thus granted duty-free access to 75 items from Pakistan, of which 64 were textile items, having an overall import value of around €900 million.

The decision is seen to adversely influence India’s textile export to EU, as Indian products would continue to bear the burden of import duty of around 6 to 12 percent. India exported $5.9 billion worth of textiles to EU in 2009, and Pakistan’s export during the same year stood at $2.2 billion.



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