Committee warns GSP+ access at risk

"We are getting signals that the GSP+ status is in the doldrums because of human rights issues," Qamar, a former finance and commerce minister, said while chairing the committee. He did not specify the exact concerns that could lead to an adverse EU decision.

The last monitoring report on the Generalised Scheme of Preferences Plus (GSP+) highlighted scores of human rights and fundamental rights violations, a weakening judicial system and curbs on freedom of expression.

The scheme runs until December 2028, and a deputy prime minister-led committee is preparing an application to qualify for the new scheme from January 2029, Minister of State for Finance and Revenue Bilal Kayani top beneficiary of the EU's GSP+ trade scheme, recording €7.5 billion in exports to the bloc in 2024 under preferential tariffs,, which evaluated the implementation of 27 international core conventions in beneficiary countries.

Continuation of the scheme is critical for Pakistan, which remains unable to bring substantial improvement in its exports despite decades of protection and fiscal incentives given to exporters. The EU monitoring report underlined that Pakistan needed to take robust steps to reverse negative trends on enforced disappearances and violations of freedom of expression.

"In this regard, laws on blasphemy, cybercrime (such as PECA), defamation, counterterrorism and sedition should be amended or repealed.

"In view of the revised GSP rules from 2027, the EU said key priorities for future engagement include accountability for human rights violations, increased efforts against torture, in-prison and capital punishment reforms, and reversing negative developments on enforced disappearances and freedom of expression. During the 2023-2025 monitoring period, Pakistan has faced compliance issues with its GSP+ obligations, the report noted.

"It has regressed in a number of areas while positive change was limited. "Pakistan Peoples Party (PPP) MNA Dr Nafisa Shah raised the closure of Pakistan's borders with Iran and Afghanistan and its implications for exports to the Central Asian republics.

"There is an impact on trade with Central Asia but we closed our borders with Afghanistan because of national security priorities," Kayani said. Despite a conflict between China and India, neither country has suspended trade, Muttahida Qaumi Movement-Pakistan (MQM-P) MNA Jawed Hanif said.

Trade scheme fails. The standing committee expressed disappointment over the failure of the fixed tax scheme for traders, as only 222 new shopkeepers joined against a hope of one million out of 3.7 million non-filers.

"We did not get the kind of response that we had hoped for," Kayani said in response to a question from Dr Nafisa Shah, adding that traders now had no excuse after the government accepted all their demands, including exemption from audit, a fixed tax rate and no dealings with the Federal Board of Revenue (FBR).

There will be no further extension of the scheme after it expires on October 31, and the government is beginning a new phase of imposing fines and taking enforcement action, he said. Traders remain largely outside the tax net, and the government offered them a new scheme in June, the third since 2022.

This too failed, with only 222 new traders joining. The minister of state said the government had consulted the attorney general for Pakistan before taking legal action and did not disclose the nature of the action.

However, sources said there could be legal and ethical issues if the government gives traders a Rs10,000 first default notice under the new scheme with a direction to file returns, whereas any non-trading person is required to pay a Rs25,000 fine for late filing.

Qamar repeatedly asked whether Prime Minister Shehbaz Sharif and the federal cabinet were in favour of punitive action and would not budge when traders threatened to observe a strike. "The government is very much committed to take action and we are preparing an enforcement plan for the approval of the prime minister," Kayani said.

He said there was no reason traders would observe a strike, as the scheme had been prepared with their extensive input, and sought Parliament's support before enforcement action. The committee chairman was of the view that the FBR did not have the manpower to go after all traders.

Given limited enforcement capacity, the FBR could use powers to suspend bank accounts or other services to compel traders to become filers, Hanif recommended. Kayani said the government was considering severing services but that these could be measures of last resort.