India seen lifting veto on EU duty waiver for Pakistan

BRUSSELS/LONDON Mon Sep 12, 2011 9:54pm IST

India's Prime Minister Manmohan Singh (R) speaks with his Pakistani counterpart Yusuf Raza Gilani as they watch the ICC Cricket World Cup semi-final match between India and Pakistan in Mohali March 30, 2011. REUTERS/Raveendran/Pool/Files

India's Prime Minister Manmohan Singh (R) speaks with his Pakistani counterpart Yusuf Raza Gilani as they watch the ICC Cricket World Cup semi-final match between India and Pakistan in Mohali March 30, 2011.

Credit: Reuters/Raveendran/Pool/Files

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BRUSSELS/LONDON (Reuters) - Pakistan is hopeful that India will allow Islamabad to boost textile exports to Europe under a post-floods trade assistance scheme as relations between the neighbours improve, diplomats said on Monday.

A meeting of Pakistan's and India's trade ministers in New Delhi in late September is likely to yield an announcement that India will drop its veto of a European Union duty-free programme for Pakistani products, diplomats in Brussels, Geneva and London said.

"This is a very positive message from India to Pakistan and the government of Pakistan will very much appreciate it," Pakistan's High Commissioner to London Wajid Shamsul Hasan told Reuters.

A trade ministry official in New Delhi would not be drawn on the outcome of the meeting but confirmed the ministers would discuss the issue when they meet on Sept. 28.

Formal approval by India could follow at the World Trade Organization in early November and subsequently by the European Parliament, opening the way for European duties to be lifted on a list of Pakistani textiles and other products including ethanol as early as next January, diplomats said.

"We welcome news reports (of India planning to drop its veto) but of course await any decision at the level of the WTO," said John Clancy, spokesman for the EU executive Commission that has been pressing for the waiver.

THE IMPACT OF CRICKET DIPLOMACY

Commercially, the impact of the European scheme -- proposed last year to prop up Pakistani industry reeling from the floods of July 2010 -- is likely to be modest and short.

If it is approved, it is likely to add just 100 million euros ($136 million) to Pakistan's annual exports, and can remain in place for no more than two years.

Pressure from powerful textile-makers in Spain, France and Portugal also means that Pakistan's bed linen exporters -- whose products make up a large proportion of the country's exports -- will be excluded from the scheme.

But politically, it is a sign of slow but steady progress in relations between India and Pakistan, which agreed earlier this year to revive a formal peace process broken off after the November 2008 attacks on Mumbai by Pakistan-based militants.

Shamsul Hasan said the EU trade waiver had been discussed by Prime Minister Manmohan Singh and his Pakistani counterpart Yusuf Raza Gilani in March when they joined each other to watch an India-Pakistan cricket match in Mohali in India.

Talks on the waiver had been progressing since then, and agreement would go a long way towards moving along the peace process. "It is a very welcome decision," he said. "It will bring India and Pakistan closer together."

This summer, a meeting of India's and Pakistan's top commerce officials advanced the idea of greater flows of goods currently encumbered by trade barriers and red tape, one diplomat said.

The EU is drafting separate plans that could allow Pakistan access to long-term trade discounts from 2014 under the "GSP Plus" regime of preferential market access, though that faces opposition within the bloc.

(Additional reporting by Matthias Williams in New Delhi; Editing by Luke Baker and Myra MacDonald)

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