India-EU Trade Pact Sparks Panic in Pakistan: Is the GSP Plus Era Over?

A major shift in global trade dynamics has sent shockwaves through Islamabad’s business corridors.

Conclusion of the long-awaited India-European Union Free Trade Agreement (FTA) this January has triggered immediate anxiety in Pakistan, with economic experts warning that the country’s key competitive advantage—the GSP Plus status—is now effectively neutralized.

For years, Pakistan’s textile industry has relied on the Generalized Scheme of Preferences Plus (GSP+), which allows duty-free access to European markets. This status gave Pakistani exporters a distinct price advantage over Indian competitors, who faced import duties of up to 12%. However, the new deal changes everything.

The "Tariff Wall" Has Fallen

With the India-EU FTA now a reality, Indian exporters are set to enjoy zero-duty access to the European market. This levels the playing field, removing the only barrier that kept Pakistani textiles cheaper than their Indian counterparts.

And Competitive edge we had is gone overnight. India has better infrastructure and raw material access; without the tariff difference, our survival is at stake," warned a representative from the All Pakistan Textile Mills Association (APTMA).

Why Pakistan is Panicking

The stakes could not be higher. The EU is Pakistan’s largest export destination, absorbing nearly $9 billion worth of goods annually, mostly textiles and apparel.

• Fear: Analysts predict a massive flight of orders from Pakistan to India as European buyers shift to the more stable and now cost-effective Indian market.

• Economic Hit: With Pakistan already grappling with an economic crisis and high energy costs, a drop in EU exports could be catastrophic for its foreign exchange reserves.

What’s Next?

While the Pakistani Foreign Office has stated they are "assessing the impact," the mood on the ground is grim. Unless Pakistan can rapidly modernize its industry or secure a new diplomatic breakthrough, the "GSP Plus" golden ticket may have just lost its value.