KARACHI: Pakistan’s apex trade body on Friday said the country’s exports to the UK and the European Union would face a setback in months ahead after the Britain voted to leave the now 27 nations bloc.
“We may see decline in exports to the UK in coming months where before the EU was in charge on trade policy and the trade negotiations with non-EU countries are conducted by the commission on the basis of a negotiating mandate from the member countries’ trade ministers,” said Ahmad Jawad of the Federation of Pakistan Chambers of Commerce & Industry (FPCCI).
“The Ministry of Commerce may immediately coordinate the UK officials to find the way how shipments may continue between two countries in this scenario, where assumptions now there about the trade agreements.”
Jawad, however, said the key to economic success would lie in the trade deals the UK could strike with the rest of the world.
“The disruption for British business could last well beyond the time taken to reach a divorce settlement with the EU, which is expected to take at least two years,” he said.
Jawad said the country has almost failed to fully exploit the European Union’s GSP plus facility on the back of government’s poor policy response and especially indifference towards the country’s top export oriented textile sector.
The country’s total exports dwindled by 14.4 percent during July-December 2015/16.
Pakistan had entered the GSP plus club where the UK was included from January 1, 2014, enabling it to export textile goods to 28 European countries till 2017 without any duties.
Under it, almost 20 percent of Pakistani exports entering the EU market at zero tariff and 70 percent at preferential rates.
The EU accounts for 25 percent of Pakistan’s exports and 10 percent of imports. The bilateral trade volume is around $11 billion. Pakistan is exporting mainly textiles and leather products to EU and imported mechanical and electrical machinery, chemical and pharmaceutical products.
Jawad said the UK is amongst the largest exporters to Pakistan with over 100 British companies physically operating in Pakistan. In 2014, the UK goods exported to Pakistan were worth £618 million. Bilateral trade in goods and services increased from £1.9 billion in 2009 to £2.2 billion in 2013.
Analysts said that a weaker pound sterling and euro will render Pakistan’s exports more expensive.
Of the total textile exports during Jul-May 2016 of $11.6 billion, UK textile exports are $1.2 billion (10pc). The country’s imports can also potentially increase as a result of cheaper goods from UK and also Europe due to a weaker Pound Sterling and Euro, which may be negated to some extent due to lower oil prices.
Eman Khan of Tresmark — financial terminal that tracks currencies – said the vote will affect the country’s textile industry as it export around 25 percent to the UK and the EU.
“Also the oil sector will come under pressure as oil declined by around five percent and finally the automobile industry that saw the Yen spike four percent,” Khan said.