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EU aid to Pakistan
Feature: 3/10/2001

European Union plans to aid Pakistan's ailing economy have run into unexpected obstacles, with Portugal and Spain objecting to recent proposals by the European Commission to increase textile and clothing imports from Pakistan (see director-e News, Thursday 18 October and Tuesday 23 October).

EU diplomats say that Portugal has voiced serious disapproval of the 'trade for peace' package for Pakistan drawn up by EU trade chief Pascal Lamy.

Despite the political imperatives of helping Pakistan outlined by Lamy, diplomats said Lisbon has expressed fears that its domestic textile sector could be hurt by rising imports from Pakistan. "Portugal is very angry", said one EU diplomat.

Meanwhile, Spain and some others in the EU bloc have said they are unconvinced by Lamy's call for Pakistan to be given additional tariff concessions for textiles and clothing under the EU's special tariff scheme for countries combating drug trafficking.

Madrid and others have reportedly told their EU counterparts that they see no evidence that Pakistan has succeeded in eliminating drug trafficking and therefore does not merit special concessions.

In addition, intra-institutional battles could also hold up approval of the EU textile package, with several countries in the bloc accusing Lamy of still not having sent his proposals to the EU council of ministers for an in-depth debate by governments.

The unexpected resistance from Portugal, Spain and others runs counter to recent EU promises to help Pakistan cope with the economic and political fall-out from the US military action in Afghanistan. EU foreign ministers said again in Luxembourg that they wanted the prompt signature of a new trade and co-operation agreement with Pakistan and were ready to provide help to bolster the country's economy.

However no date has been set for signing the accord. An EU budgetary aid package promised to Islamabad has also yet to be tabled.

Courageous stance

"We all agree that Pakistan needs special help given its courageous stance on helping the US", said an EU diplomat. "But we cannot ignore the vital interests of one or more of our member states".

Others in the bloc point out that while EU is strong on sending political signals of support and solidarity to countries, governments in the bloc almost always then raise technical objections linked to their domestic industrial or farming interests.

"This time it is about towels and bedlinen from Pakistan. Last time it was about canned tomatoes from Morocco", said a veteran EU watcher.

While Portugal's objections were a political embarrassment for the EU, a decision on the Pakistan package could be taken by qualified majority, he added.

The European Commission is adamant that its textile and clothing concessions for Pakistan must go through if the EU is to keep its promise of helping a vital frontline nation in the war against the Taliban.

"Trade opportunities for Pakistan have to cover clothing and textiles because those are the country's major exports", said one official.

Drugs campaign

The Commission is also insisting that Pakistan has pursued a vigorous campaign to eradicate the production and transit of drugs. European Commission president Romano Prodi told the EU summit in Ghent last week that Portugal had little to fear from Pakistan's textile and clothing exports.

The 15 per cent increase in quotas being suggested for Pakistan would translate into a 1.5 per cent increase in total EU imports of towels, 4 per cent rise in imports of bed linen and a 1 per cent increase in imports of table linen, according to the Commission.

Lamy's proposals call for the elimination of all EU tariffs of Pakistani garments and textiles and a 15 per cent increase in Pakistan's textile quotas.

The theoretical value of the concessions is expected to be around US$1 billion (£691.6 million) over a period of four years.
Author: John Gibbon
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