The federal government of Pakistan has made a significant decision to withdraw its proposal to impose up to 100 percent regulatory duty on a range of imported goods, including luxury items and used vehicles. This decision comes following objections from European Union (EU) members and amid ongoing negotiations between Pakistan and the EU for the Generalized System of Preferences (GSP) Plus.
Six months prior to this development, the Pakistani government had taken measures to stimulate trade and economic activity by abolishing regulatory duties on vehicles with engine capacities up to 1800 cc. Additionally, import duties on new vehicles, mobile phones, and several other commodities had been reduced. These steps were aimed at promoting trade and reducing the cost of consumer goods.
The Recent Proposal
The latest proposal by the government sought to reimpose regulatory duties selectively on imported goods. The intention was to target items that could potentially contribute to foreign exchange savings for the country. Moreover, the proposal aimed to double the duties on items with low existing duties and those with already high import duties, with increases ranging from 30% to 50%.
Details of the Proposal
The proposal included a list of 104 items on which increased duties recommended. Additionally, the government planned to add 20 new items to this list. The estimated impact of implementing these new duties was substantial, with the tax administration predicting foreign exchange savings of approximately $400 million for Pakistan.
Objections from EU Members
However, the proposal faced strong objections from EU members, who expressed concerns that such a move would negatively affect the ongoing negotiations for GSP Plus status. The GSP Plus is a trade arrangement that grants developing countries preferential access to EU markets, and Pakistan had been seeking an extension of this status.
The Role of the Tariff Policy Board
The Tariff Policy Board played a pivotal role in reviewing and deliberating upon the government’s proposal. Despite the government’s intention to impose these regulatory duties, the Tariff Board did not concur with the proposal, leading to its adjournment.
The Withdrawal Decision
In light of the objections raised by EU members and concerns that the proposed duties could jeopardize negotiations for GSP Plus status, the federal government made the decision to withdraw the proposal. This decision reflects the complexity of balancing domestic economic interests with international trade negotiations.
The withdrawal of the proposal to impose 100 percent regulatory duty on imported goods underscores the intricacies involved in trade policy decisions, particularly when international negotiations and trade agreements are at stake. While the government had initially sought to increase revenue through these duties and promote foreign exchange savings, it had to reconsider in light of broader diplomatic and economic concerns. The ongoing negotiations between Pakistan and the EU for GSP Plus status remain a critical element in the country’s trade agenda, and any decisions made in this context carry far-reaching implications for Pakistan’s international trade relations and economic stability.