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Pakistan’s Export to Europe

The EU is Pakistan's largest trading partner. The overall EU-Pakistan trade volume reached €8.1 billion in 2011, up by 19 percent from 2009, with Pakistan enjoying €1 billion a surplus in the balance of trade with the EU. EU imports from Pakistan expanded by 35 percent to €4.6 billion in 2011 from €3.5 billion in 2009. Pakistani exports to the EU are expected to receive a further boost with the EU trade concessions in response to the 2010 and 2011 floods in Pakistan. Trade with EU accounted for about 20 percent of Pakistan's total trade in 2011. The EU received 21 percent of Pakistan's total exports whereas 17 percent of Pakistan's imports comprise of EU manufactured products. Pakistan ranks at 47th position amongst EU's trade partners and at 49th and 42nd position respectively amongst the import and export partners. Pakistan's exports to the EU are heavily dependent on textile (41.8 percent) and clothing (33.6 percent) products, followed by leather products accounting for 12 percent. The main imports from the EU are mechanical and electrical machinery (48 percent) followed by chemicals and pharmaceuticals (13.5 percent) and telecommunication equipment (12.4 percent). In order to further promote two-way trade between the EU and Pakistan, both partners agreed in May 2007 to set up a Sub-Group on Trade under the auspices of the EU-Pakistan Joint Commission. Moreover, to discuss trade policy developments more broadly, a Dedicated Dialogue was initiated in 2009, to tackle individual market access issues. At present Pakistan benefits from the EU’s Generalized System of Preferences (GSP) which is a system that in its present form has benefited the traditional sectors, mainly textiles and leather. As a result, almost 20 percent of Pakistan's exports enter the EU at zero tariff and more than 70 percent at a preferential rate. However a new system has been launched by Brussels which will enter into force on 1 January 2014. This new system might allow Pakistan's access to the EU market under a regime that is akin to duty and quota free access (GSP+) for all products from 2014. Pakistan's application for such provision is being considered by Brussels. As indicated in the GSP Regulation, it might take 8-10 months to decide. Following the devastating floods in 2010, the EU granted an exceptional package of autonomous trade concessions to Pakistan on humanitarian grounds. These trade concessions cover 75 categories of products, or over a quarter of all Pakistani exports to the EU. This exceptional regime was cleared by the World Trade Organization (WTO) in February 2012 and entered into force in November 2012. It will remain in place until 31 December 2013. As part of its development cooperation with Pakistan, the EU Delegation runs a special program to promote more diversified exports from Pakistan to the EU by assisting Pakistani companies to better understand and be able to meet EU product standards, which are among the most stringent in the world. The Programme "Trade Related Technical Assistance" has been instrumental in resuming Pakistani seafood exports to the EU market beginning March 2013. Current priorities include gem stones and precious minerals as well as leather and tannery products. The European Union supports Pakistan’s smooth integration into a rules based global economy. This can be seen at various levels, be it furthering bilateral trade, promoting direct investment, supporting institution building at federal and provincial level and defending human rights, which include the implementation of international labour standards.

Investment

A number of EU companies have made major investments in Pakistan. By some estimates, Pakistan has an immediate requirement for up to USD 20 billion in infrastructure development that could provide good opportunities for EU exporters and investors. The most promising sectors for EU exports include oil and gas (exploration and transportation), power, agro-industry, information technology; textile machinery, gem mining, precious and semi-precious stone cutting, franchising, consumer goods and environmental technologies. A major privatization effort in the telecommunications and financial sectors should offer additional markets for EU services, producers and investors.

Institutional Setup

The EU and Pakistan are engaged in an institutional dialogue on trade relations. The EU-Pakistan Joint Commission includes a Sub-Group on Trade which meets bi-annually in Pakistan and Brussels. Issues like trade policy, sectoral trade matters, antidumping cases and mutual interest of business communities are discussed in the Sub-Group on Trade. EU economic cooperation with Pakistan is increasing. Today, trade development and the promotion of business and institutional links represent about 10 percent of the EU’s development budget for Pakistan. EU funded bilateral and regional programmes focus on: strengthening Pakistan’s economic institutions, policy instruments and infrastructure management; trade development, and improved investment environment and enhanced business-to-business cooperation; enhanced mutual understanding in the academic, scientific and cooperation fields. Overall, Pakistan’s integration in the world economy is considered crucial for the sustainable economic development of the country. In this respect the recent improved trade relations with neighbouring countries in particular Afghanistan and India are therefore welcomed by the EU.