Pakistan-eu: A Partnership in Slow Progression

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M. Saeed Khalid*

The European Union has traversed several stages of development and consolidation since its inception as an economic community in 1957 under the Treaty of Rome. A gradual process of integration has brought important gains to the Europeans. The EU is a global political and economic player in the same league as the US and China. With 27 member states and a population of half a billion, the Union constitutes the single largest customs union and common market. The monetary union of 13 EU members successfully adopted the Euro as their common currency, which has emerged as the world’s second most important monetary unit after the US dollar. It should, however, be understood that European integration in the framework of the EU is essentially through non-military means. Modest gains have been made in the form of some EU sponsored peace-keeping operations. The EU does aim at a common foreign and security policy but military commitments of its members remain in the ambit of NATO, where most of them are represented.

The EU’s importance as a crucial partner in politico-economic terms has yet to be fully grasped by our federal and provincial governments, the media, academic institutions and the civil society. The EU too continues to punch below its weight in Pakistan – a country where foreign relations remain focused on traditional partnerships or adversarial zero sum games. The EU’s fascination with China and India in a globalized economic system has further sapped its energy to develop cooperation with medium-sized Asian powers. Countries like Pakistan have to make the best of a bad deal and become the proverbial Mohammad going to the mountain.

Trade is an important facet of our ties with Europe, which has been a major destination for Pakistan’s traditional exports of textiles, carpets, surgical and sports goods, leather products and more recently, items like farm produce and seafood. European industries have met our needs in plant and machinery, pharmaceuticals, chemicals, aviation and defence systems. While Pakistan’s share in the EU’s overall trade remains insignificant, the Union of twenty-seven accounts for one fourth of our exports. Consequently, any changes by Brussels in its import and tariff regime have a considerable impact on our export sector. With the abolition of textile quotas, competition among textile exporters has grown fiercer. Pakistan is a beneficiary of the EU’s Generalized Scheme of Preferences, commonly known as the GSP. Pakistan also enjoyed zero tariff for a limited period of time under the GSP+ regime, granted to countries engaged in curbing the cultivation and production of narcotics. As a result, Pakistan’s exports to the EU rose from $ 3,726 million in 2003-04 to $ 4,247 million in 2005-06. Pakistan lost the GSP+ status in 2006 but a reduction in the anti-dumping duty on bed-linen helped to compensate the losses and the overall exports rose to $ 4,627 million in 2006-07 and crossed the $ five billion mark to reach $ 5,185 million in 2007-08. Exports fell to $ 4,412 million in 2008-09 due to the economic slowdown in Europe and production shortfalls caused by power shortages in Pakistan. EU exports to Pakistan have grown steadily over the period 2003- 2009 reaching $ 5,644 million in 2008-09.

Conducting trade negotiations with the EU is a formidable challenge for most of its international partners. European Commission officials claim that the EU’s GSP is the most beneficial to the developing countries and provides them better access than the United States. The developing countries are divided into two broad categories: the LDCs and the rest including India and Pakistan. China does not enjoy the GSP facilities. The special category of GSP+ comprises LDCs or developing countries with smaller economies, having ratified international labour conventions, and not exceeding 1 percent of the EU’s GSP covered imports. These criteria led to Pakistan’s exclusion from the revised list of GSP+ countries. An important factor behind the EU’s technical knockout of Pakistan was the strong opposition by India to keeping Pakistan in the GSP+ category. India continues to weigh on the future of Pakistan’s exports to Europe by virtue of the ongoing negotiations for a free trade agreement between India and the EU. The initiative for these talks had come from the EU as part of a plan to safeguard its interests against the backdrop of a faltering Doha Round. Similar negotiations were launched by the EU with South Korea and ASEAN countries.

As the proposed EU-India FTA posed a potential threat to Pakistan’s vital textile sector, Islamabad launched a diplomatic offensive from 2007 onwards arguing that with SAARC countries other than India and Pakistan already benefiting from zero tariff in the EU because of being in GSP+ or LDC categories, a free trade agreement between India and the EU would severely hit Pakistan’s exports. Pakistan would become the only South Asian country without preferential access to the world’s largest trading bloc. To marginalize Pakistan in this manner would be totally unjustified after all the sacrifices Pakistan had made in the fight against terrorism. Pakistan’s vigorous lobbying including visits by President Zardari and Prime Minister Gilani is not without impact in Brussels and the capitals of EU members. However, the Union and particularly the Commission has not come up with a solution to Pakistan’s predicament. Pakistan’s latest proposal for a special dispensation on account of its role in fighting terrorism has not had the desired result either. A study conducted by the University of Sussex for the European Commission concluded that the EU-India FTA would have an impact on Pakistan but fell short of acknowledging the severity that Pakistan is convinced it would have.

Pakistan has good reasons to be exasperated with the EU’s slowness in finding appropriate solutions to address the imbalance caused by the steady rise of competitors’ share in EU markets while her own share keeps sliding down. The feeling in Pakistan is that either the EU is not particularly concerned by its tremendous losses due to the ongoing fight against terrorism or the member states are not as focused on the issue as the United States. A European diplomat described the EU members as being divided into two categories; the northern “free traders” and the southern “protectionists.” The remark was made at the time of heated discussions among EU members on the question of anti-dumping duty on Pakistani bed-linen. It was evident that while the Scandinavians,

Germany and the UK were more sympathetic to Pakistan’s difficulties, they had no domestic textile lobby opposing relief to Pakistan. On the other hand, countries like Spain, France, Italy and Poland were anxious to keep the duty as they saw Pakistan’s bed-linen competing with their industry. Pakistan’s loss of GSP+ status and the continuation of anti-dumping duty on its bed-linen came to be known as a “double whammy.”

Trade and politics

It is important for the civil and military establishment of Pakistan to grasp the role of politics in influencing the EU’s outlook toward other countries. The law enforcement agencies should take a careful note of the Union’s sensitivity with regard to democracy and human rights. The defence of democracy and fundamental rights is an essential part of the EU’s institutional ethos. The EU had set democracy as a basic qualification for European nations aspiring to join the Union. Countries like Greece, Portugal and Spain were not admitted as members till their dictatorial rulers left the scene. The same yardstick was applied to the former communist ruled countries. The EU is not in a position to dismantle military rule in other parts of the world but it encourages democracy by keeping the military regimes at bay. The European Parliament is particularly active in the defence of democracy and human rights inside the EU and elsewhere in the world. It can obstruct EU cooperation and aid for countries where democratically elected governments have been toppled.

In Pakistan’s case, work on the ratification of cooperation accord, generally known as Third Generation Agreement (TGA) was suspended as a reaction to the military coup of October 1999. It was only after the general election of 2002 and considerable prodding by the US that the EU relented and reopened high-level contacts with Pakistan in view of the country’s vital role in the success of western operations in Afghanistan. But the situation did not improve quickly as the EU Election Observer Mission concluded that the 2002 election was not free and fair thereby delaying the ratification of TGA by the European Parliament till May, 2004. Five years had been lost in bringing a semblance of normalcy to EU-Pakistan relations because democratic rule in the country had been derailed. Even after the major obstacles in the way of normal cooperation had been cleared, President Pervez Musharraf’s refusal to relinquish the post of army chief continued to rankle with the EU, which was also concerned about of the impending general election of 2007. There was a marked difference between the treatment President Musharraf received in Washington or London and the continued reluctance of Brussels to be seen as cozying up to a president in uniform. He did finally land in Brussels after having been in power for seven years. While trade and fight against terrorism were high on the agenda of his talks, the EU remained focused on ensuring proper conduct of the coming election in Pakistan.

Full-fledged democracy was not the only EU concern. Over the years, Brussels had linked upgrading of relations to issues of human rights and illegal immigration. The Third Generation Agreement required the conclusion of a “readmission agreement” with Pakistan that would introduce a uniform procedure for the return of illegal immigrants from the EU countries. Pakistan being apprehensive of mass deportations of immigrants resisted the pressure but it was evident that the EU would not move on dialogue on trade unless the readmission issue was out of the way. The EU’s case became stronger after Pakistan entered into a prototype accord with the UK. Pakistan agreed to expedite the talks on the EU’s draft readmission text. As a sweetener, the EU agreed to urge the member states to consider legal migration quotas and facilitation of genuine visa requests. The readmission agreement was formally signed in 2009.

The EU pursues its policy of defending democracy and human rights by incorporating these subjects in cooperation agreements with the developing countries. The European Parliament is particularly vocal on the violation of human rights. Its Committee on Foreign Affairs and the Sub-Committee on Human Rights hold debates resulting often in the adoption of resolutions censuring violations of human rights. In Pakistan’s case, the EU institutions have repeatedly raised questions about violations of minorities’ and women’s rights, seeking appropriate changes  in  legislation.  The  European  Parliament’s  Delegation  for Relations with South Asian Countries is active in arranging hearings on important developments in the region. The delegation also monitors the situation of human rights in South Asia. The EU Mission in Islamabad makes a yearly demarche to the Government on the status of human rights in Pakistan.

The EU-Pakistan relationship saw steady progress from 2004 onwards. The political dialogue was upgraded from senior officials to ministerial level.  Pakistan’s willingness to negotiate the readmission agreement had cleared the way for inaugural meeting of the Joint Commission in May 2007 which led to the creation of three sub-groups on trade, development assistance and science and technology. A fourth sub-group was added to deal with issues of governance and human rights. However, the proclamation of emergency in Pakistan in November, 2007 gave a jolt to the relationship, with the EU making it clear that it would not be associated with the observation of any elections held under the rule of emergency. Cooperation was back on the rails with General Musharraf’s retirement from the post of army chief and the lifting of the emergency in December, 2007. Benazir Bhutto’s assassination led to serious new concerns in the Union about Pakistan’s stability. President Musharraf paid a visit to the EU Headquarters in January, 2008 to confirm his acceptance of the EU’s election monitoring thus clearing the way for an election observation mission of over a hundred members for the polls held in February 2008.

The EU Observer Mission concluded that the election was held in a fair manner. Their report contributed to the widespread acceptance of the election results lending credibility to the return of democracy. Pakistan was considered a success in terms of electoral process. In a series of statements from the highest organs, the Union communicated its desire to nurture a long-term partnership with a democratic Pakistan. The manifestation of this approach came in agreeing to hold the first ever summit-level consultation with Pakistan. The EU holds regular yearly summit meetings with its “strategic partners” comprising the United States, Canada, Russia, China, Japan, India and Brazil. The main criterion for the summit process is the economic importance of these countries and their share in EU’s foreign trade and investment. As Pakistan does not have a significant place as a major EU’s trade partner, the Union agreed to hold ad-hoc summit meetings with Pakistan in recognition of her frontline role in the most important conflict involving the west namely the ongoing war against terrorism.

The joint statement issued at the summit held on 17 June 2009 at EU  Headquarters  provides  a  roadmap  for  EU-Pakistan  cooperation in the years ahead. The summit expressed strong commitment to comprehensive cooperation and commencement of a strategic dialogue as partners including at the highest level on wide-ranging subjects like trade, development, education, science and technology, counter- terrorism and strengthening democracy. Great emphasis was placed on the recognition of the resolve and sacrifices by the Pakistani people and security forces in confronting terrorism, extremism and militancy.

The EU-Pakistan summit should provide an impetus to the diplomats and technocrats on both sides to devote greater energy and in the case of EU resources as well, to realize the objectives of their partnership. In principle, this should lead to more frequent consultations on counter- terrorism. Specifically, the EU is committed to help in enhancing civilian capacities in curbing terrorism through improvements in the law enforcement and criminal justice system. The EU would provide greater funding for    development activities in areas hit by terrorism. The summit can help in strengthening the EU’s resolve in supporting aid under Friends of Democratic Pakistan Forum. The EU has agreed to host FODP ministerial meeting in Brussels in October 2010.

The first summit was held in an upbeat mood against the backdrop of positive trends in their relationship. The anti-dumping duties on Pakistani bed-linen expired in March 2009 and the EU refrained from any new investigation bringing a sigh of relief among the exporters. As a result, our bed-linen exports to the EU could rise by $ 200 million annually. The EU expressed its willingness to send a mission to assess the progress on hygienic conditions in the fisheries sector. The resumption of seafood exports to the EU depends on success in the certification process. At the Tokyo conference of FODP, the EU announced an assistance package of $ 640 million for social sector development over a period of four years. A grant of Euro 50 million was announced for food security projects under the Global Food Facility. The Readmission Agreement between Pakistan and the Union was formally signed in October 2009 in Brussels to enhance cooperation in matters pertaining to immigration. Earlier, the two sides had entered into a Horizontal Air Services Agreement in March 2009 to meet the EU’s requirement that bilateral air agreements should be replaced by union-wide arrangements. The European Investment Bank has offered a loan of Euro 100 million for renewable energy projects. Brussels also pledged assistance worth Euro 15 million for capacity building of the law enforcement and judicial system in Pakistan. The Spanish government offered to hold the second Pakistan-EU summit during their presidency in the first half of 2010.

The EU had gone through institutional changes under the Lisbon Treaty by the time of the second summit. Although the six-monthly rotating presidency had not disappeared and Spain held that position, Mr. Herman Von Rompuy, former prime minister of Belgium had been elected to the newly created post of EU president. Consequently, he co- chaired the second summit with Prime Minister Yousuf Raza Gilani, in Brussels on 4 June 2010. The second summit was held after intensive in-house consultations on both sides. It succeeded in developing the outline of the most comprehensive and ambitious framework yet of EU- Pakistan cooperation. The joint statement issued by the summit stressed that “while last year’s summit served to underline the EU’s strong support for Pakistan’s democratic government, the second summit has set up the basis for a strategic dialogue aimed at forging a partnership for peace and development rooted in shared values, principles and commitments.”

According to the summit statement, the agreed goals of Pak-EU cooperation would be realized by jointly addressing “regional and global security issues, to promote respect for human rights, economic and trade cooperation and provision of humanitarian assistance and to cooperate to further strengthen Pakistan’s democratic institutions.” The two sides also agreed to reinforce their commitments by drawing up a five-year Engagement Plan with specific targets for joint actions. Regular consultations would be held between senior officials and the level of the Joint Commission would be raised. The Foreign Minister of Pakistan and the EU’s High Representative for Foreign Affairs and Security Policy will also meet regularly. The target areas of Pakistan- EU cooperation have been listed as follows:

–                      regional security

–                      stability and prosperity

–                      human rights

–                      democracy

–                      economy and trade

–                      science and technology

–                      disarmament and non-proliferation

–                      counter-terrorism

–                      counter narcotics

–                      energy

–                      education

–                      cultural cooperation.

Given the regional and global context in which the Pakistan-EU summit process has been launched, in-depth discussions were held to identify ways and means of cooperation to eliminate terrorism, dismantle terrorist net works and prevent them from recruiting, funding terrorist organizations and sponsoring of terrorist acts. Both parties agreed to strengthen practical arrangements for a more regular counter-terrorism dialogue. They also acknowledged the importance of strengthening nuclear security and agreed to develop cooperation in the area of export controls.

On trade and investment, the Pakistan delegation was satisfied with the EU’s acknowledgement of the challenges faced by Pakistan’s economy as a result of the fight against terrorism. The EU recognized that the increased cost of doing business in Pakistan had adversely affected export performance and poverty levels. But to Pakistan’s consternation, the Union once again fell short of providing Pakistan immediate relief to cope with an extraordinarily difficult situation. As a result of this lack of will in the EU to rise to the challenge, discussions on these issues would be pursued in the context of the Dedicated Dialogue on Trade, including a possible free trade agreement. The two sides would work jointly toward further mutual liberalization of trade in goods and services. The European Commission has started exploring how aspects of the EU’s GSP plus can be looked at in the context of the new GSP regulation to allow new beneficiaries including possibly Pakistan. The EU is assisting Pakistan to resume its fisheries exports and would carry out the necessary inspection. The EU has committed to increase funding of trade-related technical assistance in the yearly annual assistance of Euro 75 million which in itself has registered an increase of 50 percent from the earlier projections. The EU assistance which is in addition to bilateral aid programmes of member states and their contributions to multilateral agencies, will be mainly directed to priorities such as capacity to support the rule of law sector, support of Malakand strategy and development of the energy sector.

The EU supported regional cooperation in South Asia and more specifically the resolution of outstanding Pakistan-India issues through resumption of the dialogue process. A ministerial meeting will be held in the second half of 2010 as part of the EU-Pakistan strategic dialogue process. The EU offered to host the next Ministerial Meeting of the Friends of Democratic Pakistan in Brussels expected to be held in October 2010. These meetings will now have an additional and pressing problem to address, that of assisting Pakistan to cope with the widespread devastation caused by the unprecedented floods in Pakistan. The task is twofold; on the EU’s side to muster the energy and resources to overcome the bureaucratic inertia of Brussels to meet an extraordinary situation. The challenge for Islamabad is equally serious; to build capacity on a priority basis to absorb the aid already on offer, and greater funding that would follow the EU’s pledges in the wake of August inundations. Another chance for EU-Pakistan cooperation to move into the fast lane is at the doorsteps of mandarins in Brussels and Islamabad.