Reading some press clippings I saw that, at the Karachi leather fair, the Pakistan Tanners Association had asked its government to approach the EU requesting a reduction in the import duty levied on finished leathers. The PTA reported a sharp decline in exports to the EU and they blame lack of competitiveness compared with leather exported from India, Bangladesh and Türkiye.

I understood from the clippings that Pakistan considered itself unfairly treated, so I asked Masood Shaikh, chairman of the PTA, to explain the situation and he took the time to answer me, which I appreciated. Mr Masood said: ‘I would like to clarify that what I wanted to state was not exactly as released.

‘As a matter of fact, it was not my complaint about the EU. My proposal was for the withdrawal of import duty levied in EU countries on Pakistani finished leather on the analogy of such facility available to Bangladesh, Türkiye etc. This gesture of due incentive would certainly enable Pakistani leather exporters to be competitive in the EU market and to strengthen our business relations with them.’

Whoever reads Limeblast regularly knows that I am not too keen on unconditional economic help. In my view, it is logical that any developing country utilises its own natural resources and receives help from industrialised countries to set its industry up. But once the industry is up and running, it is on its own and subject to ‘the market’.

There are also political considerations.

Why should the world give incentives to India and/or Pakistan who use a major part of their annual budget for developing arms of mass destruction? Many other countries struggle in worse economic conditions and do not dedicate their national wealth to such development!

I see incentives linked to social issues such as non proliferation of weapons of mass destruction, environment, child labour etc. The Indian subcontinent has benefited enormously in the past from EU help, and there is nothing wrong with that.

This enabled them to build up a modern and important leather industry with a large number of tanneries outsizing many EU tanneries.

Mr Masood sent me a chart showing a sharp decline of imports of Pakistan leather in France, Germany, Italy, Portugal and Spain, countries that all have their own tanning industry. Part of the Italian and Spanish tanning production was moved some 20 years ago to the Indian subcontinent and it was mainly the Spanish and Italian tanners who collaborated with Pakistan tanners to improve their product.

Due to stiff competition from tanneries all over the world, including Pakistan and India, a large number of tanneries in Europe were forced to close. The leather industry in the subcontinent is a very well established corner stone in the world production of leather with huge, well-equipped tanneries and outlets worldwide.

At this point in history, I believe that the tanneries in the subcontinent are at least on a par with their colleagues in Europe. Hence, in my view, if all have an equal chance to compete one with another, we get fair trade, we get good consumer prices and we get good quality. Europe is, in any case, at a disadvantage, having few raw hides and skins of its own, having extremely strict and costly pollution laws and huge labour costs.

Twenty years ago, Europe was Pakistan’s biggest buyer of crust and finished leathers. When prices in Europe were not convenient for Pakistani exporters they, logically, looked for other, better markets, which were found particularly in Venezuela, Mexico, Japan and China.

At that point, if European importers wanted Pakistani leather, they had to compete with those countries in order to be supplied by Pakistani tanners. Now the roles are reversed as Europe, likewise, finds it convenient to buy from other sources. So why should Europe give particular incentives to Pakistan who, rightly, like everybody else, looks after its own interests? Pakistan did not give Europe preferential treatment when it found it more convenient to trade with the Far East, did it? One cannot have his cake and eat it.

It is rather peculiar that the Pakistani garment manufacturers ask for the levy of an export duty of 20% to make the export of leather more difficult in order to protect their branch of industry when, at the same time, the Pakistan Tanners Association complains about reduced exports to Europe and wants the EU to eliminate the 3.5% import duty.

In short, the EU is asked to bear the discomfort caused to the Pakistani tanners by their own garment manufacturers.

From where I sit, it looks as if the garment manufacturers want to make it impossible for the Pakistani tanners to be competitive and create for themselves a position of monopoly in which they can buy locally finished leather at the price they want.

Mr Masood underlines the fact that imports of finished leathers in Pakistan have no restrictions. Hence the garment manufacturers have the whole worldwide market to choose from in order to purchase their leather at the most competitive price.

I checked and, indeed, the EU favours Bangladesh who are not subject to any import duty for crust or finished leather, against the 3.5% imposed on Pakistan and India. However, objectively, I would say that Bangladesh as an economic ‘power’ cannot be compared with Pakistan or India and it can easily be considered a country in need, even if Bangladesh also has a fair share of important and modern equipped tanneries.

I ask myself, though, whether the levying of a mere 3.5% import duty on leather does make any difference in the competitiveness of Pakistani tanners? Aren’t there other factors to be considered?

Maybe the Pakistan government should intervene at home rather than with the EU and give a tax rebate to its leather industry to make it more competitive and counteract the 3.5% duty. But again would it make that much difference?

The tycoons who run their huge tanneries in Pakistan are standing on their own feet and don’t need any help. They have defended themselves splendidly in the competitive environment of the leather industry by producing good quality leather. By a policy of continuous expansion they have reached production levels that require large quantities of raw material, part of which is now imported.

Furthermore they have reached levels that require full sales portfolios because when sales drop and their productivity is diminished, their overheads run havoc and influence competitiveness, certainly by more than just 3.5%.

The text of this Limeblast was sent to the president of the PTA in July for his comments but so far no reply has been received.

Sam Setter