Germany warns of consequences for Pakistan’s GSP+ status over blocked imports 

LAHORE: In a letter to Pakistan’s Federal Minister for Economic Affairs, Sardar Ayaz Sadiq, Ambassador Alfred Grannas of the Federal Republic of Germany expressed his concern that Pakistan’s Generalised System of Preferences Plus (GSP+) status is at risk. He states that the risk arises due to the State Bank of Pakistan (SBP) continuing to block the import of electric vehicles from German companies Mercedes-Benz, BMW, and Audi.

What is the GSP+ Programme? 

The GSP+ programme provides tariff preferences for imports to the European Union  from developing countries facing vulnerabilities to support poverty eradication, sustainable development, and global economic participation, while reinforcing good governance. Eligible countries, such as Pakistan, can export goods to the EU market without tariffs on 66% of tariff lines, contingent on demonstrating tangible progress in implementing 27 international conventions related to human and labour rights, environmental protection, climate change, and good governance.

The current 10-year GSP+ scheme which Pakistan benefits from is set to expire on December 31 of this year. 

The Letter’s Contents 

Grannas highlights in the letter that the SBP’s actions have sparked outrage from Germany, which is Pakistan’s largest trading partner in the EU by both volume and value. He states that the SBP’s actions are in direct contradiction to Pakistan’s commitment to boosting mutual trade and to the GSP+ status, which provides preferential tariffs to Pakistan for its exports to the European Union in exchange for the country’s commitment to implementing 27 international conventions on human rights, labour rights, and environmental protection.

Germany has been one of the leading countries in financial assistance for Pakistan, providing aid to those affected by floods last summer. The State Bank’s refusal to open Letters of Credit (LCs) for German companies’ electric vehicle imports risks damaging the friendly relations between the two countries, jeopardising Pakistan’s GSP+ status and Germany’s long-standing trade partnership with the country.

Ambassador Grannas called for urgent action to resolve the situation and prevent further damage to bilateral relations and Pakistan’s GSP+ status. He urged the Federal Minister for Economic Affairs to intervene and ensure that German companies’ imports of electric vehicles are no longer obstructed, thereby upholding Pakistan’s commitment to boosting mutual trade and protecting the environment. 

An Escalatory Tale 

The letter from Grannas to Sadiq is the latest in a series of letters penned on behalf of the German automotive companies regarding their discontent with the import restrictions that the SBP has had in place since summer 2022. The companies originally had a letter written by the German Pakistan Chamber of Commerce and Industry (GPCCI) in August, where they not only highlighted their grievances regarding import restrictions by the SBP but first made the threat of the import restrictions being a matter of contention regarding Pakistan’s GSP+ status. 

A follow-up letter was written earlier this year in February, again by the GPCCI. Here the onus was on the SBP to combat what the GPCCI alleged as ‘propaganda’ against German automotive companies in Pakistan which suggested that they had been given import leniency. It was here again that the GPCCI highlighted their main demand: Import restrictions. They suggested that the ‘propaganda’ had encumbered German automotive companies from accessing LCs, and once again brought up the import issue. The GPCCI, this time not only brought up the threat of Pakistan losing its GSP+ status again but also about the aid that Germany had given to Pakistan in response to the 2022 floods. 

If the previous two were veiled threats, then this is an unadulterated threat by the German automotive companies in Pakistan via the German foreign office itself.