India’s free trade agreement with the European Union has triggered concern in Pakistan over potential losses to exports and employment, with officials and industry representatives warning that the deal could erode the country’s preferential access to the EU market under the Generalised System of Preferences Plus (GSP+).The agreement is expected to narrow Pakistan’s tariff advantage in the EU by extending similar terms to India, potentially affecting duty-free, quota-free access that currently covers around two-thirds of Pakistan’s export lines. A former Pakistani commerce minister said the country’s “zero-tariff honeymoon” with the EU was over, arguing that exports worth about $9 billion to the bloc had become vulnerable as similar tariffs would now apply to “all main regional competitors”.

He said the government needed to enable industry to compete by aligning regional energy, tax and financing costs, warning that $9 billion in exports to the EU and around 10 million jobs were at risk. He added that industry could no longer absorb the impact of systemic inefficiencies.

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The erosion of Pakistan’s marginal advantage is expected to be most pronounced in apparel and textiles, described as the country’s largest industrial employer and biggest export earner. Data cited from the Pakistan Bureau of Statistics and the All Pakistan Textile Mills Association showed that textiles and clothing accounted for 60 per cent of total merchandise exports in FY2024, generating about $16.5 billion. The largest share of finished goods was exported to the EU and the UK.

In an earlier address, the former commerce minister had said these challenges were compounded by the India-UK trade agreement, which eliminates 90 per cent of tariffs over a phased 10-year period. He also pointed to expanded capacity and modernised production in competing countries such as Bangladesh and Vietnam, in addition to India.

Kamran Arshad, chairman of the All Pakistan Textile Mills Association, told Arab News that the competitive landscape had fundamentally changed and said India was now “significantly more competitive in the EU market”.

The government in Islamabad said it was reviewing the implications of the India-EU FTA while reaffirming its commitment to long-standing ties with the 27-nation bloc. Foreign Office spokesman Tahir Andrabi said at a routine press briefing that trade arrangements had significantly benefited both sides, noting that textile and apparel imports from Pakistan to the UK had tripled, ensuring uninterrupted supplies of affordable goods. He said the total trade volume between Pakistan and the EU stood at over 12 billion euros and added that Pakistan remained committed to strengthening relations with the EU in all areas of mutual interest, including trade.