Pakistan's Textile and Clothing Sector and its Future in the European Union (Evaluation Report published by Sustainable Development Policy Institute, Islamabad)

[Introduction:] EU-Pakistan Trade in Textiles and Clothing: A Love – Hate Relationship? European nights are intimately linked to Pakistan. A large number of the community’s citizens spend their nights on Pakistani bed-sheets. In 2005, the South Asian economy was the largest supplier of bed-linen to the union (Aziz, 2006). Sufficient basis for an intimate trade relationship, one could assume. True. The European Union (EU) is Pakistan’s largest trading partner, with textiles and clothing (T&C) accounting for almost two thirds of its sales to the union (EC’s Delegation to Pakistan, 2004). As in many close relationships, however, the EU also is the cause of a lot of pain to its partner. One sore example was the imposition of a punitive import duty on Pakistani bed-linen in 2004, accusing the exporter to dump bed-linen below cost prices at the European market. Rumor has it, that this move was actually an act of jealousy, punishing Pakistan for upgrading its commercial air fleet with US-American Boeings rather than with European Airbuses. In the following sections, a closer look is taken at the anatomy of, and prospects for, the trade relationship between Pakistan and the EU, focusing on the T&C sector. Features of both partners that have the potential to promote or constrain T&C exports from Pakistan to the EU are sketched in the next section. Therein, the focus is on EU’s trade-related policies regarding Pakistan and on the structure of Pakistan’s T&C industry. Section 3 provides an overview of the resulting exports to the common market. Section 4 outlines possible scenarios for the future of the contested relationship and their likely consequences in terms of industrial and overall development. Finally, measures that support a healthy trade partnership between Pakistan and the EU in T&C are described in the last section.