EU-PAKISTAN TRADE DEAL BEATS U.S. TO THE PUNCH

Byline: Kristi Ellis / With contributions from Joanna Ramey

WASHINGTON — At a time when the U.S. is poised to strike a deal on a trade package with Pakistan, the European Union announced a proposed pact Tuesday that would remove all tariffs on apparel and increase quotas for Pakistani textiles and clothing by 15 percent.
The move by the EU, which seems to have beaten the U.S. to the punch, could push the U.S. to move more quickly on a similar deal that’s been in the works for several weeks. The EU’s proposal comes as Secretary of State Colin Powell is visiting Pakistan and India to calm tensions between the two rivals and discuss economic initiatives in return for their support in the fight against terrorism.
“We have made this negotiation a top priority because Pakistan is in an exceptional situation,” said EU Trade Commissioner Pascal Lamy in a statement. “We have targeted those areas where Pakistan can benefit most, namely clothing and textiles.”
Lamy and Pakistani Commerce Minister Abdul Razzaq Dawood met in Singapore over the weekend to finalize the deal, which needs approval of EU nations and the European Parliament.
Pakistani exports to the EU were $2.09 billion in 2000, with textiles and apparel accounting for 75 percent. The measure would eliminate the existing duty of 7 percent, or $136.29 million worth of duties a year, as of Jan. 1. (Dollar figures are converted from the euro at current exchange rate.)
Meanwhile, the Pakistani government and U.S. importers are waiting on a U.S. deal to be struck. As reported in WWD, U.S. officials have been considering legislation to eliminate duties, though the Bush administration has made no formal proposal.
International trade administration officials have met with congressional trade-writing members about the reduction of duties on Pakistani apparel and textile exports and which categories should be included. U.S Trade Representative Robert Zoellick also met with Dawood last weekend in Singapore, but details of the meeting are not known.
Earlier this month, Dawood met with several officials from the State and Commerce Departments, the White House and the Office of the U.S. Trade Representative to request a temporary suspension of tariffs and quotas on $1.9 billion in apparel and textile exports to the U.S. through 2004.
“This gives the U.S. a lot of food for thought,” Farrakh Qayyum, minister of trade for the Pakistani Embassy, said Tuesday. “I think the EU has taken the lead, where the lead should have come from the U.S.”
He warned that U.S. importers need an incentive to continue doing business in a war zone where they are facing increasing insurance and shipping costs. Qayyum said he doesn’t expect to have an answer until next week because Zoellick is in Shanghai for the Asia Pacific Economic Cooperation meeting of foreign trade ministers and is then expected to join President Bush this weekend for the APEC Leaders conference.
Congress has already signaled its willingness to help Pakistan’s economy in exchange for the country sharing intelligence and other cooperation in battling terrorist forces in neighboring Aghanistan. On Tuesday, the House, following Senate action on Oct. 4, approved a bill lifting economic sanctions imposed on Pakistan and India.
The Pakistani sanctions barring U.S. economic and military aide were imposed after a military coup brought to power its current President Pervez Musharraf. A year before, similar sanctions were imposed on Pakistan and India when the two enemies each tested nuclear weapons.
U.S. importers hailed the EU’s proposal, but domestic textile makers were wary.
“My expectation is now that the EU has taken this action, that will press the Bush administration to make the final decisions on a package it intends to put forward,” said Julia Hughes, vice president of international trade at the U.S. Association of Importers of Textiles & Apparel.
Erik Autor, vice president and international counsel for the National Retail Federation, said: “Elimination of quotas has a very limited commercial benefit, but it is an important signal to send to Pakistan.”
Charles Bremer, director of international trade at the American Textile Manufacturers Institute, dismissed the EU’s package as “a hollow gesture,” noting that the EU did not change tariffs on Pakistan’s largest export, bed linens.

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