By David Brunnstrom and Juliane von Reppert-Bismarck
BRUSSELS, Aug 20 (Reuters) - The EU foreign affairs chief
will urge EU states next month to back trade concessions for
Pakistan as worries grow about the impact of devastating floods
on the stability of its fragile government.
EU diplomats say support for such trade breaks appears to be
growing, given Pakistan's strategic importance in the struggle
against Islamist militancy, although they have been opposed by
industry groups and EU states with competing textile industries.
Top EU diplomat Catherine Ashton will push the issue again
at a Sept. 10-11 meeting of EU foreign ministers -- three months
after a summit with Pakistan ruled out immediate concessions.
"The international community needs to be ready to support
Pakistan in a lasting manner," Ashton said this week. "This will
be a significant element for the long-term recovery.
"A safe, secure, stable and prosperous Pakistan is in the
interests of the EU and the wider international community."
Concerns have grown about the stability of President Asif
Ali Zardari's government after criticism of his response to the
worst floods in Pakistan's history.
Representatives of Pakistan's key textile sector said this
week that damage to the cotton crop and consequent supply
shortages could be a final blow to an industry already suffering
from shrinking global demand, crippling power shortages and
instability brought on by a Taliban insurgency.
According to EU data, Pakistan's exports to the European
Union in 2009 totalled 3.02 billion euros ($3.86 billion), or
21.9 percent of its total exports.
Some products from Pakistan already enter the EU duty-free
or at reduced rates, but textiles such as bed linen and towels
-- more than 65 percent of Pakistan's exports to the EU -- are
still subject to a 12 percent tariff.
Pakistan wants better access through the EU's Generalised
System of Preferences-Plus (GSP+) regime - offered to developing
states that commit to rights and good-governance conventions.
Pakistan has not qualified for this as its exports to the EU
are too large and the EU remains concerned about its reluctance
to implement human rights and other conventions.
However, a European Commission review of GSP rules could
increase the number of eligible states to include Pakistan and
those of similar economic ranking.
The Commission proposals are due early next year, for entry
into force in 2012 or 2013, but Ashton is looking to speed up
the process, according to an internal document seen by Reuters.
EU diplomats say there is resistance from EU states such as
Italy, Poland and Portugal, which see their own textile
They say a powerful opponent to any quick move has been the
European Commission president, Portugal's Jose-Manuel Barroso,
who in June reaffirmed a timeframe of up to three years.
European textile lobby Euratex warned in May that expanding
GSP+ would "inflict a severe blow" to the EU industry. EU states
in favour of concessions argue that the effect is overstated.
Diplomats said that if it proved impossible to ease GSP
rules, another option could be to waive duties unilaterally, as
was done after the Sept. 11, 2001 attacks in recognition of
Pakistan's status as a key ally in the war in Afghanistan.
However, Pakistan's neighbour and rival India successfully
challenged this step as a violation of World Trade Organisation
rules, forcing Brussels to withdraw the concession.
EU diplomats said it was too early to judge how the EU
debate would evolve, but that there was a growing realisation
that something significant needed to be done to help Pakistan.
"You have to decide you have the political will to do
something, then create a mechanism robust enough to fit WTO
rules," one said. "There are various ways that can be done."
If there is strong enough political will from EU capitals,
the EU could amend the relevant part of the GSP "in a few weeks
or months", a senior EU trade official said. But with
conflicting interests dividing each of the main European
institutions, any quick change will be hard to pull off.
Countries including Britain and Sweden have pushed the issue
strongly with growing German and French support, diplomats said.
"The question is what is done, and over what timelines," the
diplomat said. "The floods have increased the urgency, and the
political imperative to act is different than a few months ago.
"You have vast parts of Pakistan affected by floods; it's
immensely strategically significant and the situation will sadly
get worse and worse. There's a real need to demonstrate the
international community as a whole can react."
(Writing by David Brunnstrom; editing by Luke Baker and Kevin