Enticed by the plans of Unites States to expand the scope of its General System of Preferences (GSP) program, many Asian countries have enhanced their diplomatic outreach for securing the benefits.
The GSP was established by US to help developing countries by reducing tariffs on up to 5,000 products. However, the scheme, which facilitated about $16 billion worth of imports in 2020, has been inactive since the end of that year. Though there seems to be a consensus on renewing the program in US, most policymakers expect to see significant reforms in it. While the proposed changes will be centered on labor rights, increased emphasis would be on beneficiary country’s performance on other desirable criterion such as environmental protection, rule of law, poverty reduction, anti-corruption and women’s empowerment. Going by US plans for introducing comprehensive reforms in the scheme, ensuring its continuance would not be easy for non-serious participants. One such participant is Pakistan, which lags behind in the fulfillment of many crucial requirements, despite being keen on the prospect of renewal.
Pakistan’s dismal record in labour conditions, human rights, women & child rights, religious freedom, governance may turn out to be roadblocks in its attempts to secure a GSP favor from the US. Several local and international NGOs keep on issuing poor report cards to Islamabad on worker conditions including bonded labor, child protection, women’s rights, human trafficking, etc. However, the indifference of various state institutions impedes any improvement in human rights in the country. Overall, women and children are among most vulnerable groups; subjected to human trafficking and forced to work under inhumane conditions. With questionable human rights credentials and unwillingness to improve, securing GSP benefits from the US under a reformed framework may prove to be a daunting task for Islamabad.
Notably, Pakistan is already facing heavy compliance challenge as a beneficiary of a similar incentive provided by the European Union under its GSP plus scheme. EU is about to include six fresh conventions in the new scheme, which may be difficult for Pakistan to comply with and implement. Response from the US on regular trade and investment proposals of Pakistan is not encouraging either. The Pakistan Ambassador Masood Khan reportedly held an informal discussion in June 2022 with senior officials of the United States Trade Representatives (USTR) for advancing Pakistan’s case on GSP and other trade issues. However, the US side was quite firm and particular on its expectations out of such proposals. This includes the proposal of organizing a long pending meeting of Trade and Investment Framework (TIFA) council. The USTR officials apparently insisted on the need to hold a virtual seminar on Good Regulatory Practices (GRP); a Virtual convention on Supply Chain management and diversification; and crafting a joint statement on Women Empowerment before that.
US policymakers were also concerned about trade restrictive order (SRO 598) of the Pakistani government. They highlighted the challenges being faced by the US exporters because of import restrictions placed by Islamabad on luxury items through the said order. The officials further contend that these restrictions were issued without any prior notice, causing disruption in the shipments, etc. On Pakistan’s repeated demand for removal of ban on Shrimps imports from Pakistan, the US authorities are reportedly non-committal till the resolution of their concerns.
US insist on the usage of Turtle Extruder Device (TED), which allows turtles to escape fishing net as it is an endangered species. Washington had suspended shrimp imports in 2018 as local fishermen in Pakistan were not using this device. Similarly, the European Union had also restricted shrimp imports from Pakistan in 2012 over sanitation concerns. The EU had concerns about storage and other facilities in Pakistan. This is a major issue for Pakistan as sea food export is country’s 5 th largest foreign exchange earner and shrimps are an important part of this trade. Pakistan earns about $400 million from shrimps, which are now mostly exported to China. Further, Washington is non-committal on the issue of increasing investment in Pakistan. Regarding investment opportunities for the US businesses, particularly in tech sector, US companies have always conveyed their concerns over privacy and data protection regulations and keep asking Pakistan to follow the best practices and global standards to attract foreign investment.
Surrounded by the challenges of rising international debt, high domestic inflation and dwindling foreign reserves, Pakistan’s economy requires a major push for its economic growth. Increasing exports and inward FDI, which could have been the needed cushion for it, are elusive on the back of its faulty policymaking and broken institutions. Lack of progress in trade discussions with US is just one of the indicators of a greater malfunctioning.