Why Pakistan is sweating over India-Europe trade deal
India Today
The India-EU free trade agreement (FTA), years in the making, will give India broad market access to those sectors that have long fostered Pakistan's export success in Europe, especially textiles and apparel. Pakistan now seems to be feeling the heat and is in panic mode.
The 'mother of all trade deals' between India and the European Union (EU) has not only caused ripples in the US, but also closer home, across the border in Pakistan. The free trade agreement (FTA), years in the making, will give India broad market access to those sectors that have long underpinned Pakistan's export success in Europe, especially textiles and apparel. These labour-intensive sectors were the worst hit due to Donald Trump's 50% tariff on India. With the India-EU trade deal, Pakistan now seems to be feeling the heat.
The Shehbaz Sharif government is in panic mode. The EU is Pakistan's second-largest export market, and at stake is $9 billion (Rs 8.25 lakh crore) in annual shipments, mostly textiles and apparel. Pakistan's foreign ministry on Friday said it was in touch with the European Union to tackle any impact on its exports in the wake of the trade deal with India. Moreover, Pakistan's Deputy Prime Minister Ishaq Dar also held a hastily arranged inter-ministerial meeting to review the situation. It followed a meeting between PM Shehbaz Sharif and the EU's ambassador to Pakistan.
"We are following this matter bilaterally with the EU member states and also collectively with the EU headquarters in Brussels," the Pakistan foreign ministry spokesperson said.
The timing of the India-EU FTA could not be more unsettling for Pakistan, coming as it struggles to scale up exports and its economy is in tatters. According to a World Bank report, Pakistan's export share has sharply fallen from 16% of GDP in the 1990s to about 10% in 2024.
At the centre of Pakistan's concern is that the India-EU deal would weaken its competitive edge in the European market. Pakistan enjoys Generalised System of Preferences Plus (GSP+) status, a scheme under which Pakistani traders get duty-free access to the EU market on nearly 66% or two-thirds of their exports.
Under the GSP+ status, granted in 2014, Pakistan saw its textile exports to Europe increase by 108%. In fact, the 27-member EU bloc accounts for nearly $7 billion, or 40%, of Pakistan's textile shipments each year. Crucially, the GSP+ status for Pakistan will expire next year.
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