Mission GSP: Sarwar succeeds as trade deal dodges a bullet

Punjab Governor Chaudhary Mohammad Sarwar’s recent visit to the European Union (EU) to rescue the GSP+ trade deal, which is up for extension pending review in 2023 amid calls from the European Commission (EC) to reconsider Pakistan’s eligibility and even suspend it if need be, seems to have been successful as dozens of MEPs (Members of European Parliament) assured him of their full cooperation. So the immediate problem, which was about retention of the program till 2023, has been addressed for the time being. The visit included meetings in Brussel with MEPs, Vice President of EU Parliament, Chairman of the International Trade Committee, the Hungarian prime minister’s office, and assembly members in Italy, where he lobbied for support in the matter of the GSP+ facility’s extension, Basmati rice exports, the situation in Afghanistan and India’s excesses in Occupied Kashmir. The GSP+ situation had become critical earlier in the year after indications that the European Parliament (EP) might close the window before the facility expires in 2023. First, in April 2021, EP passed a resolution decrying the deterioration of human rights and religious freedoms in Pakistan and the resolution “overwhelmingly passed” with 662 votes for it, three against it, while 26 members chose not to vote. This led to another round of voting in May 2021, since the resolution also called for “European Commission (EC) and the European External Action Service (EEAS) to immediately review Pakistan’s eligibility for GSP+ status in light of current events and whether there is sufficient reason to initiate a procedure for the temporary withdrawal of this status and the benefits that come with it, and to report to the European Parliament on this matter as soon as possible.” This provision got 678 votes in its favour, eight against it, with 10 members choosing not to vote. Surprisingly these developments did not raise an alarm in Pakistan, even though suspension of GSP+ threatened to cut Pakistan’s export revenue by $4-6 billion every year. The commerce ministry did not comment on it and one of Pakistan’s ambassadors stationed in the EU played down these developments, implying that EP’s resolutions were not of a binding nature for EC, which was not entirely true. Interestingly Governor Sarwar, who has never been part of the commerce ministry, has spearheaded all efforts to get the facility, get it extended, and now rescue it, right from the beginning. First, he personally travelled to Strasbourg in 2013 and met 36 MEPs, following which Pakistan was granted the facility in 2014. Then he went to Portugal and Belgium in 2019 and met relevant MEPs and state officials, which facilitated an extension for Pakistan till 2023. Now, once again in 2021 he’s had to personally intervene on the instructions of the prime minister and in a bid to salvage the trade deal as the commerce ministry’s efforts and lobbying by Pakistan’s ambassadors in the EU failed to make any progress. This time Ch Sarwar met more than 30 MEPs including VPs of EP and updated them about the progress that has been made in implementing 27 internationally recognized conventions that the country must comply with in order to retain the deal. His most important meeting was with EP Vice President Fabio Massimo Castaldo, who was briefed about legislation underway to meet all demands of the deal in addition to its benefits for the local production and export industry in terms of employment, output and revenue. The MEP appreciated that announcements made by EP in April and May spread confusion throughout the industry, badly hurting investor sentiment, and promised to fully support Pakistan’s position during the review. Dr Fabio in his invitation letter had also specifically requested Ch Sarwar to brief the EP with regard to Afghanistan as a stable Afghanistan is pivotal to peace in South Asia. Yet despite the assurances it is not immediately clear if enough votes have been secured to avoid an outright suspension. The April and May resolutions were unique because Pakistan is so far the first country to be subject to such a review. And the situation has become even more pressing with the delay in negotiations with the IMF. The budget for the ongoing fiscal year counts heavily on export revenue to finance its expansionary nature. And at a time when the trade imbalance is already threatening to bloat the current account beyond manageable proportions, the loss of the GSP+ facility would blow a $4-6 billion hole in revenue and imply imminent collapse of the whole economy. That is why Governor Sarwar’s efforts have come as a much-needed shot in the arm for the economy. There is a difference between retention and extension of the program, and the problem Pakistan has been facing since the April review risks suspension of the facility, making this a retention issue. Therefore, the most important meetings that Ch Sarwar held in the EU were with their international trade committee, whose agreement is key to retaining as well as extending the program. Success with the committee usually snowballs through the European Parliament as well as European Commission because it makes all the crucial trade decisions for the Union. All things considered, the issue of retaining the GSP+ facility till the present term expires is pretty much in the bag. And since Pakistan has been able to show progress on the 27 original conventions as well as the eight added conditions, there’s a good reason that Ch Sarwar is confident about the country retaining the facility well beyond the present term. However, there’s still not been a formal announcement from the commerce ministry that explains the issue transparently.