NEW DELHI - India, Bangladesh and Peru have opposed the European Union's proposal to give duty free access to Pakistani textiles as a flood relief measure. The countries have informed the World Trade Organisation (WTO) that trade concession was not the right option as it harmed interests of competitors, a government official has said.
A decision regarding EU's proposal to allow duty-free import of 75 items - 64 of them textiles - from Pakistan was deferred at a recent meeting of the WTO committee on trade in goods after the three countries raised objections. It will be taken up in the next meeting scheduled for late January.
"India fully supports EU's intention of helping Pakistan in its time of need, but assistance should be given directly in cash or kind and not by bending trade rules," a commerce department official told ET. The country's textile industry could be hit by the flood relief package as Pakistan is one of India's strongest competitors in the European market. EU can grant concessions to Pakistan only if the WTO gives it a waiver from its obligation of treating all member countries the same way, under a provision known as the most favoured nation clause.
"The EU is appearing to be helping Pakistan, but in reality the bill is being transferred to competing countries that would lose market share," said DK Nair, secretary general of industry body Confederation of Indian Textiles Industries. According to EU's plans, it would allow duty free import of 75 items for three years starting January 2011, amounting to almost 900 million euros in import value.
Although India's garments and textiles exports to the EU in 2009 stand at $5.9 billion, which was more than double of Pakistan's $2.2 billion, it could lose a market share to its neighbour if duty-free access is allowed as import duties that range between six percent and 12 percent.
Bangladesh has said that it should be compensated the trade loss if the EU is allowed to implement its proposal, the official said. It is not just competing countries that are opposed to the proposal.
A number of textile producing countries within the EU such as Portugal, Spain and Italy have also expressed unhappiness. "Euro- textiles, which is the apex textiles industry body in Europe, has said that it does not favour the move," the official said. With opposition from within and outside to the zero-duty proposal, the EU may be forced to look at other options to help out Pakistan.