Competing with India

The Commerce Ministry feels the Indo-EU FTA will not reduce Pakistani competitiveness

The Federal Commerce Ministry has told the National Assembly Committee on Commerce that the proposed India-European Union Free Trade Agreement does not pose an immediate risk to Pakistan’s exports. In a written brief submitted to the Committee, the Ministry said Pakistan would continue to benefit from zero-duty access for key exports under the EU’s GSP+ scheme, even after the EU-India FATA became operational. It is a little troubling to see the mindset which insists on seeing India as some sort of threat, or sole competitor, especially in the realm of business, especially commerce and trade.

There are essentially two reasons for this. First is the Indian attitude. The EU first granted GSP+ status to Pakistan in January 2014. It has always been resented by India, which has actively lobbied the EU to rescind this status for Pakistan. The fact remains that the EU is the largest export destination for Pakistan, receiving 28 percent of its exports. Of the $9.01 billion of goods exported to it in FY 2025, 90 percent entered the EU at zero tariff under the GSP+ scheme. This status will be unaffected by the FTA, and the EU does not offer any further concessions than the GSP+. It does mean that any tariff advantage that Pakistan had over India because of GSP+ will now be eliminated, and Pakistani textiles in particular, will now face that competition.

The textile industry, in earlier representations to the government, has mentioned high energy costs, taxation and financing constraints, as existing challenges, and has warned that improved market access for competitors may increase pressure on exporters. In this context, the industry has also referred to the trade agreement between India and the USA.

India-centric policies should be eschewed, especially in terms of trade and commerce. However, it should be recognized that India has generally taken a hostile position against Pakistan, which has been especially the case under the BJP government. However, the government needs to rethink its over-dependence on textile exports, for those are the pillars on which Pakistan rests all its exports. True, that is the result of a natural competitive advantage, but more movement to value-addition and industrial innovation will be a more effective tool of competition than lobbying against the other. The EU has granted Pakistan GSP+ status and India an FTA because of business reasons rather than because of political motives.