Pakistan reaffirmed its dedication to maintaining strong trade relations with the European Union (EU) on Thursday, even as industry exporters warn that India’s recent free trade agreement (FTA) with the EU could undermine Pakistan’s competitiveness in its second-largest export market.
The agreement grants Indian exporters tariff-free access across the EU, a move that Pakistani industry representatives say could diminish the country’s advantages under the EU’s Generalized Scheme of Preferences Plus (GSP+). The GSP+ scheme has historically provided Pakistan with preferential duty rates, especially benefiting its textile and apparel sectors.
During a weekly press briefing, Foreign Office spokesperson Tahir Andrabi stated that Pakistan is reviewing the implications of the deal but remains committed to its trade relationship with the EU. “Pakistan maintains long-standing, friendly, and mutually beneficial relations with the EU. The GSP+ scheme has been a successful model for bilateral cooperation,” Andrabi said, citing trade volumes exceeding €12 billion and noting a significant rise in textile and apparel imports from Pakistan under the scheme.
Exporters Express Worries Over Changing Trade Dynamics
Prime Minister Narendra Modi has hailed the India-EU agreement as the ‘mother of all trade deals,’ while European Commission President Ursula von der Leyen described it as creating a free trade zone of two billion people.
However, Pakistani exporters are concerned that India’s immediate duty-free access to the EU could erode Pakistan’s longstanding tariff advantage, especially in textiles and apparel.
Kamran Arshad, Chairman of the All Pakistan Textile Mills Association (APTMA), highlighted that the EU’s 27 member states currently purchase about $8.8 billion, or 27.2 percent, of Pakistan’s exports, with nearly $7 billion directed toward textiles. “India now has duty-free access to 100 percent of its textile and apparel tariff lines in the EU, which alters the competitive landscape,” he explained.
Currently, Pakistan enjoys duty-free access on approximately 66 percent of EU tariff lines under GSP+, whereas Indian exports previously faced tariffs of up to 12 percent. With the new FTA in effect, experts warn Pakistan risks losing its competitive edge, especially as higher domestic costs further challenge exporters.
Shankar Talreja, Head of Research at Topline Securities, noted, “India’s higher value addition and vertical integration will boost its competitiveness in the EU market,” adding that rising production costs in Pakistan complicate the situation.
Industry leaders also point to high energy costs as a significant hurdle. Musadaq Zulqarnain, Chairman of Interloop Holdings, emphasized that electricity tariffs in Pakistan are 25–30 percent higher than regional competitors, further impacting export costs.
Economic Outlook and Calls for Action
Pakistan’s export sector is already facing challenges, with exports declining 9 percent to $15.2 billion in the first half of the current fiscal year, down from $32.1 billion last year. Former Commerce Minister Gohar Ejaz warned that the country’s reliance on preferential trade access may no longer suffice to sustain exports, stating, “$9 billion in exports to the EU and 10 million jobs are at risk.”
Trade associations and analysts are urging the government to act swiftly. Saquib Fayyaz Magoon, Vice President of the Federation of Pakistan Chambers of Commerce and Industry, warned that Pakistan’s advantage in the EU could disappear unless measures are taken to lower costs and enhance competitiveness. He called for reduced power tariffs, tax reforms, and increased export incentives.
In response, the government announced it is reviewing issues related to the cost of doing business for export industries, amid mounting concerns that India’s expanded access to the EU could reshape regional trade dynamics.