1. Pakistan’s accession to GSP Plus Status under EU GSP Scheme, Regulation 978/12

3. GSP Plus Scheme Article 9 and Annexure VII of Regulation 978/12 A GSP beneficiary country may benefit from the tariff preferences provided under the special incentive arrangement for sustainable development and good governance if they have: Less than 2% share in imports of EU and seven largest GSP sections of its imports into the Union of products listed in Annex IX and represent more than the threshold of 75 % in value of its total imports of products listed in that Annex, as an average during the last three consecutive years And Ratified all the conventions listed in Annex VIII of the Regulation, undertaking for maintaining the ratification, accepting of regular monitoring and reporting in accordance to the conventions etc.

4. Incentive Article 12 “The Common Customs Tariff ad valorem duties on all products listed in Annex IX which originate in a GSP+ beneficiary country shall be suspended”

5. Graduation/Removal of Incentive Article 10(5) Where a GSP+ beneficiary country no longer fulfils the conditions referred to in points (a) or (c) of Article 9(1), or withdraws any of its binding undertakings referred to in points (d), (e) and (f) of Article 9(1), the EU may remove the concessions. Graduated from vulnerability parameter i.e. 2% of EU Imports or 75% product diversification Failure in implementation of ratified conventions Failure to maintain ratification of the conventions Reservation in the process of monitoring and review as per ratified contentions Failure to participate and cooperate in monitoring process according to Article 13

6. GSP+ Scheme Coverage Article 11 and Annex IX, EU Regulation 978/12 “The products included in the special incentive arrangement for sustainable development and good governance (GSP+) are listed in Annex IX of the Regulation” Annex IX includes complete textiles and clothing value chain i.e. Harmonized commodity description and coding System (HS) chapters 50 to 60 under Section 11a and chapters 61 to 63 under Section 11b”

7. Duration of the Scheme Article 43(3) “The scheme shall apply until 31 st December 2023. However, the expiry date shall neither apply to the special arrangement for the least-developed countries, nor, to the extent that they are applied in conjunction with that arrangement, to any other provisions of this Regulation”

8. Reporting Mechanism Article 14 “By 1 January 2016, and every two years thereafter, the Commission shall present to the European Parliament and to the Council a report on the status of ratification of the relevant conventions” That report shall include: (a) the conclusions or recommendations of relevant monitoring bodies in respect of each GSP+ beneficiary country; and (b) the Commission’s conclusions on whether each GSP+ beneficiary country respects its binding undertakings to comply with reporting obligations,

9. Safeguards Article 29 Under this Article, the Commission can remove tariff preferences in face of certain trade performance criteria Increase by at least 13,5 % in quantity (by volume), as compared with the previous calendar year Those products of a country which exceed 6% of total EU imports of that product referred to in Article 29(1), shall attract the above restriction.

10. Rules of Origin Article 33, “To benefit from the tariff preferences, the products for which the tariff preferences are claimed shall originate in a beneficiary country” For the purposes of the preferential arrangements referred to in Article 1(2) of this Regulation, the rules of origin concerning the definition of the concept of originating products, the procedures and the methods of administrative cooperation related thereto shall be those laid down in Regulation (EEC) No 2454/93 Products originate in a particular beneficiary country if they are: wholly obtained in that country, or sufficiently worked or processed there

11. Example of Rules of Origin Manufacture of a garment starting from non-originating yarn confers origin. This means that weaving and all subsequent manufacturing stages must be carried out in the beneficiary country. HS HeadingDescription of Product Qualifying Operation (Working or processing, carried out on non-originating materials, which confers originating status) For LDCsOther Beneficiary countries Chapter 61 (Knit Garments) Obtained by sewing together or other wise assembling two or more pieces of knitted fabric Manufacture from Fabric Knitting and Making up (including cutting)

12. Regional Cumulation Groups that may benefit from Regional Cumulation are four: Group III: Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, Sri Lanka Materials originating in one country of the group which are further worked or processed in another beneficiary country of the same group are considered to originate in the latter country. Regional cumulation between countries in the same regional group shall apply only under the condition that the working or processing carried out in the beneficiary country where the materials are further processed or incorporated goes beyond the minimal operations set out in Annex 16

13. Pakistan and the Scheme Pakistan’s application for attaining the status of a GSP Plus Beneficiary has cleared all pre-requisites and procedures successfully. Pakistan has won majority of the votes of MoEP in its favor through well planned and coordinated efforts Eligibility of Pakistan as a GSP+ beneficiary is expected to be published / notified on January 6 th, 2014, however, it would be effective from January 01, 2014. The benefit of zero rate duty will be applicable to Pakistani products entering in EU on or after January 01, 2014.

14. Keeping all other factors constant, Pakistan can now achieve an increase of around 29% in total exports to EU due to emergence of GSP Plus with in an year The increase in textiles and clothing exports can be expected around 38% The tariff advantage is maximum for the apparel sector of Pakistan and hence Pakistan should gear up towards value added market. The experience of ATP has also shown us that we have better chances to capture the apparel sector as our utilization percentage is expected to be more than 93% of quota in apparel product lines in 2013 It is also expected that due to various safeguard provisions in the new GSP Scheme the strong product lines of India and China may go further into disadvantage as an outcome of expulsion from the GSP benefit.

15. The prime products in which Pakistan is expected to do the best includes: printed bed linen of mmf cotton trousers (men and women both) dyed and printed bed linen of cotton men’s knit trousers Towels Socks cotton jerseys printed twill cotton cloth etc The real challenge for Pakistan will be to ensure 100% utilization of its capacities and resources and its diversion towards value addition.

16. Opportunities and Challenges The GSP+ will act like a catalyst to rejuvenate Pakistan’s entire export products range Benchmarking of products in which we have a competitive edge, rather than comparative edge Modernization of management and processes Greater use of IT, especially for monitoring of T&C exports Enabling environment must be created at all levels – legislation, facilitation and export-friendly policies Product diversification will be necessary to avoid saturation – 13 tariff lines share more than 50% of our textiles exports mix

17. Activity on Ground Minister has already convened first meeting with value added apparel stakeholders on the topic. Following decisions have been made: GSP+ Textiles Facilitation Committee is being notified Data sharing with PRAL on a weekly basis to start from January, 2014 FBR to issue single consolidated SRO for apparel sector Revision of rates of drawbacks by Input Output Coefficient Organisation HS Codes synchronization where necessary Training for skill and product development

18. Future Strategy Sr. No. IssueProposed MeasureExecuting Department 1Awareness of GSP+ Scheme and EU Rules of Origin Seminars and workshops to disseminate information on GSP+ Scheme and Rules of Origin Textile Industry Division, Commerce Division, FBR 2Easing the liquidity crunch of SMEs Pending liabilities of Textiles Policy Initiatives be paid; Timely refund of Sales Tax and Drawbacks (textile sector may again be declared Zero Rated Sector) Finance Division and FBR 3Unskilled LaborRelease of EDF funds for revival of Stitching Machinery Operator Training Scheme (SMOT) Commerce Division, Textile Industry Division

19. Sr. No. IssueProposed MeasureExecuting Department 4Value additionSimplification of SROs and other schemes for import of raw material and accessories for value addition; Awareness Seminar on Temporary Importation schemes FBR, Commerce Division and Textile Division 5Product diversification More than 50% of our exports are confined to only 13 products; Funds to be allocated to textiles educational institutes including National Textile University for development of new products Commerce Division and Textile Industry Division Future Strategy

20. Sr. No. IssueProposed MeasureExecuting Department 6Drawbacks on deemed import basis are warranted to increase share of Blended Products NTC recommendations be implemented Commerce Division 7Increase in Cotton Production (1 million cotton bales earn $ 1 billion) Availability of Certified Seed Enactment of Plants Breeders Rights Act Amendments in Seed Act 1976 Improvement in Extension Services NBC meeting to be held National Food Security Division, Climate Change Division and Provinces 8Cotton StandardizationImplementation of Cotton Control Act and introduction of quality based pricing system for seed and lint cotton Provinces Future Strategy

21. Sr. No. IssueProposed MeasureExecuting Department 9Cotton Leaf Curl Virus (CLCV), prevailing from last 27 years Research Funds be allocated for not only CLCV control but other cotton related measures such as Extra Long Staple, heat and drought tolerance, water and pesticide efficiency etc Finance Division 10Stringent Regulatory Regime (28 regulations of different kinds) for monitoring and inspecting of operations of units. There are also a variety of local levies which increase cost of doing business Simplification of procedures and collection of levies; One Window Operation Federal and Provincial Governments Future Strategy

22. Sr. No. IssueProposed MeasureExecuting Department 11Facilitation to Exporters GSP Plus Cell to monitor performance and to facilitate the exporters Textile Industry Division 12MarketingDedicated Textiles and Clothing Events be held in EU countries and in Pakistan Textile Industry Division/TDAP/Com merce Division Special Funds to be allocated by Finance Division Future Strategy