Union pact with Pakistan signals new relationship

Date: 17/04/1997

THE EU hopes to shake hands with Pakistan at the end of this month on a symbolic 'third generation' trade and cooperation agreement.

An end-of-April deal with the Union would mark another positive step for the troubled southern Asian country following the election in February of reformist Prime Minister Nawaz Sharif.

Although largely uncontroversial, the talks were put on ice following former Premier Benazir Bhutto's dismissal last November amidst allegations of corruption, the collapse of law and order in Karachi, and an economy spinning out of control.

With the new government now in place and functioning relatively smoothly, EU negotiators have decided that the time is right to resume discussions and close the deal.

Similarly, Pakistan is keen to invigorate its relations with the Union at a time when it needs all the help it can get.

High inflation, balance of payments difficulties and problems with the World Bank all point to an economy in deep trouble. Sharif, who has a reputation for economic liberalisation and enjoys support from the business community as well as widespread popular backing, could turn the tide. But his country's problems are far from over and his business credentials are no guarantee of long-term reform.

Perhaps the greatest challenge Sharif's government faces is to broker peace with India over the disputed province of Kashmir, which would allow his administration to reallocate funds from the military to development projects.

The subcontinent's current political turmoil, however, does not look ready for a quick solution.

Any improvement in trade with the Union would be extremely welcome. One-third of the country's exports - 2-billion-ecu worth of mostly textiles - and one-quarter of Pakistan's imports go to or come from the Union, with a roughly even balance of trade.

The new deal would not result in any immediate commercial benefits, but it would update a 1986 accord which has been overtaken by world events such as the end of the Cold War and the emergence of a global trading system.

It would also aim to create a new framework for commercial exchanges.

“The idea is that it signals a change in the relationship,” said an EU official. “We are moving away from the idea that Europe is merely providing assistance and towards a real partnership.”

The deal is, however, unlikely to allay tensions over the Union's current anti-dumping duties on Pakistani cotton.

Alongside India, China, and Turkey, Pakistan is fighting a running battle with European cotton producers over EU market access for grey cotton - the pre-processed form of the cloth.

The dispute puts Pakistan's continued reliance on leather and textiles in sharp relief. Europe gives no trade concessions under its Generalised System of Preferences (GSP) to the one product which would really help the country and shows few signs of changing its stance.

Under the deal, the Union would aim to ease the situation by encouraging economic diversification and fostering increased regional trade with central Asia.

“The sky is the limit for Pakistan. It has a climate like Spain or California, vast swathes of irrigated land and a huge river running through it, vast coal reserves, and some oil and natural gas,” said the official.

The EU will also reiterate the need for social development in the country and add to pressure for the greater economic involvement of women in the Muslim state.

But a standard human rights clause could give new ammunition to those who condemn the use of child labour in Pakistan. Labour unions have long been calling for a suspension of GSP benefits to the country, claiming that children are sold into bonded labour to prop up Pakistani industry.

Islamabad retorts that it is doing all it can and has extensive laws in place. But local poverty makes it extremely difficult for the government to exert control over people struggling just to feed themselves.