Prime Minister Shehbaz Sharif’s remarks that Pakistan is “committed to working closely with the EU on mutually beneficial trade initiatives, especially through the GSP+” may sound reassuring. But reality bites hard. In the same week Islamabad made these vows, Brussels inked an EU-India FTA that gives New Delhi phased zero-duty access across textile and apparel lines. Under GSP+, Pakistan still enjoys zero duties on only 66% of tariff lines.
That the EU has quietly underwritten Pakistan’s export resilience since 2014 cannot be stressed enough. Pakistan’s exports to the EU totalled about $9.0bn in 2024 (roughly 27.6% of all exports), built heavily on textiles and clothing. Exporters are therefore right to read the India-EU pact as more than paperwork. The All Pakistan Textile Mills Association has warned that the agreement effectively neutralises, and in some segments, surpasses, Pakistan’s existing GSP+ advantages, threatening 10 million jobs and $9 billion in trade.
However, GSP+ was never meant to be permanent insulation. It is a conditional preference scheme in return for ratifying and effectively implementing 27 conventions covering human rights, labour standards, environment, and good governance, with regular monitoring and reporting. That bargain made sense for Pakistan when key competitors faced tariffs and when European buyers treated Pakistan as a reliable, price-competitive source with a tariff edge. The EU-India agreement narrows that edge by design.
It is not difficult to see what happens next. Once tariffs stop doing Pakistan’s work for it, Pakistan will be priced and tested on fundamentals. That is precisely where Pakistan is weakest. Pakistan’s industrial electricity tariffs are repeatedly described by exporters as 25-30% higher than those of regional competitors, with calls for power prices to fall below Rs8-10 per unit to remain viable. If those numbers are even directionally correct, then Pakistan is trying to sprint while dragging policy-made weights.
The experience of Bangladesh, whose exports soared to $35.8 billion in 2018, serves as a pertinent lesson. This growth was not the result of empty rhetoric but of a disciplined, development-first approach to export enhancement.
The immediate task is not to panic, nor to romanticise GSP+ as a diplomatic trophy. It is to treat the India-EU deal as a deadline. Pakistan must engineer regional cost parity as an export policy, understanding that competitive energy pricing for export sectors is a correction for a power market whose inefficiencies have been socialised onto industry.
The state would have to stop regulating exports as if they were a luxury activity. GSP+ monitoring will continue to scrutinise Pakistan’s record, and the EU’s reporting expectations are not going away. The correct response is to build credible, streamlined compliance capacity so that it becomes a competitive asset rather than a cost shock. In addition to diversifying beyond the false comfort of raw volume in low-to-mid value textiles, we need a trade diplomacy that is more literate, mature and in sync with the changing times. *