By SKM
January 28, 2026
ISLAMABAD: Pakistan’s $7 billion textile exports to the European Union — nearly 39% of its total textile shipments — are under immediate threat following the EU–India Free Trade Agreement (FTA), which grants India full duty-free access to the EU market, effectively neutralizing Pakistan’s decade-long GSP+ advantage. The EU accounts for 27.2% of Pakistan’s total exports, worth $8.8 billion in FY2025, making it the country’s single most important trading partner.
Until now, Pakistan benefited from GSP+ status, which allows zero-duty access on 66% of EU tariff lines. Approximately 89% of Pakistan’s textile and apparel exports currently enter the EU duty-free, giving the country a critical cost advantage over India and other competitors. India, by contrast, faced duties of up to 12% under the EU’s standard GSP regime and had begun losing its eligibility, culminating in the suspension of its preferences in January 2026.
That advantage has vanished. Under the EU–India FTA concluded in January 2026, India now enjoys immediate duty-free access for 100% of its textile and apparel tariff lines, covering key products including yarn, cotton yarn, man-made fibre apparel, ready-made garments, home textiles, and men’s and women’s clothing. Pakistan remains capped at 66% duty-free coverage.
The deal extends beyond textiles. India now faces near-zero tariffs on leather and footwear (down from 17%), nearly all electronics (down from 14%), gems and jewellery, chemicals (down from 12.8%), rail products, ships, and seafood (down from 26%). Analysts call this “full-spectrum preferential access,” giving India a significant cost, scale, and regulatory advantage.
For Pakistan, the impact is immediate: the GSP+ cushion is effectively gone in sectors where Indian products already meet EU technical, sanitary, and phytosanitary (SPS), environmental, social, and governance (ESG), and compliance standards. In textiles and apparel, price, scale, and speed — rather than preferential tariffs — will now determine competitiveness. In leather, footwear, chemicals, and value-added agricultural exports, India’s supply-chain integration and policy-backed export financing further widen the gap.
Experts argue that Pakistan’s only remaining lever to compete is cost correction, particularly lowering industrial energy prices to match regional rivals such as India, Bangladesh, and Vietnam. Without such measures, Pakistan risks being outpaced in the EU market, losing market share to Indian competitors who now enjoy both tariff-free access and regulatory alignment.
Trade specialists warn that structural reforms are now unavoidable. Pakistan must move up the value chain with technical textiles, sustainable apparel, design-led products, and branded processed foods; strengthen compliance through ESG frameworks, traceability, carbon accounting, and EU-aligned SPS and REACH certifications; diversify export markets beyond the EU to GCC, ASEAN, Africa, and Central Asia; and pursue sector-specific mutual recognition agreements to remain competitive.
The EU–India FTA underscores a stark reality: preference-based access is no longer a long-term shield. Without cost competitiveness, value addition, and regulatory readiness, Pakistan risks losing its foothold in its most important export market. Ends
