- Thursday | 01 Jan, 2009
- Karin Astrid
- Working Papers
Karin Astrid SiegmannWorking November 2009
In 2005, Pakistan was the largest supplier of bed-linen to the European Union (EU). The EU is Pakistan’s largest trading partner, with textiles and clothing (T&C) accounting for almost two thirds of its sales to the common market. In this paper, 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. It reveals a contested relationship between Pakistan and the EU. ‘Carrots’ from the side of the EU were granted in the form of trade preferences and catalysed export growth. It was slowed down by the ‘stick’ of anti-dumping duties. Given the strengthened position of competitors in the post-quota era combined with structural weaknesses in the Pakistani T&C sector, i.e. mainly the lack of investment in high value-added sub-sectors and in skill development, it is questionable how sustainable this development is.
In future, Pakistan’s T&C industry will either specialise in yarn and cloth production and loose significant market shares in garments due to lack of competitiveness or it will climb up the value-added chain and further shift its export composition towards made-ups and, especially, garments. What would be the consequences of these scenarios? If Pakistan puts up with its role as a major yarn and cloth producer, and accepts that others do better - and cheaper - in garments manufacturing, this would imply high costs in terms of industrial and social development of the country. It is thus a highly undesirable future industrial pathway. Alternatively, a setting that ensures Pakistan does not lose its market shares in garment exports to the EU strengthens the trade-development bond. However, it requires a joint effort by the Government of Pakistan, the industry and its trading partner EU. The main challenge, therefore, is to promote skill development at all levels of the industry. In the garment sector, this does not only involve managerial and technical staff, but also staff at the level of operators.