Mansoor Sadiq

Import restrictions and non-issuance of Letters of Credit (LCs) on part of the government and the State Bank of Pakistan are likely to dampen Pakistan’s relations with the European Union and deprive the country of the trade benefits given to it under the GSP+ status. It is worth noting here that EU’s Generalised Scheme of Preferences Plus (GSP+) allows developing and the least developing countries a special initiative and status to pursue sustainable development provided they implement the international conventions on human and labour rights, environment and good-governance issues. Under the scheme, the EU countries have cut import duties to zero for these countries, including Pakistan.

The import curbs have led to closure or scaling down of the production process. Reacting to the import restrictions, German automakers have drawn the attention of the authorities concerned to the difficult situation faced by the official importers of Mercedes-Benz, BMW and Audi vehicles in Pakistan. In this respect, German Ambassador Alfred Grannas has written a letter to Federal Minister for Economic Affairs Sardar Ayaz Sadiq, stating that commercial banks in Pakistan were declining opening of LCs for the import of EU-origin electric vehicles (EVs), which was a strict violation of GSP+ status.

The German envoy said, “We have always appreciated the government of Pakistan’s outlook towards environment protection and efficient utilisation of clean and green energy, but I would like to draw your attention to the difficult situation of official importers of Mercedes-Benz, Audi and BMW in Pakistan, who placed their orders accordingly with the respective original equipment manufacturers. We have learned that the State Bank of Pakistan is constantly declining to open LCs through commercial banks. Even when taking into account the actual difficult financial situation of Pakistan, this casts a shadow over the good and friendly relations between the two countries.”

Germany is not only the largest and most significant EU trading partner (by volume and value) of Pakistan, it is also providing significant financial assistance to people affected by the catastrophic floods last year. “Declining the opening of LCs is against our common spirit to boost mutual trade and is strictly contrary to GSP+ and its unilateral benefits for Pakistan,” he wrote, adding that, “I look forward to cooperating with you on this matter for an early solution.”

According to Pakistan Automobile Spare Parts Importers and Dealers Association, Germany has been the largest trading partner of Pakistan in the EU as it has been importing German vehicles for decades. The association pointed out that the total import volume of German electric vehicles in Pakistan was quite negligible compared to total import bill of Pakistan.

Import restrictions have started impacting Pakistan’s relations with its key trade partners. The government has to come forward with some viable and proactive policy mechanism to enhance trade volume of the country instead of restricting the import of electric cars, which could be harmful for Pakistan as it may cost the country to lose the GSP+ status.

Credit: Independent News Pakistan-WealthPk