Business Recorder (28/01/2026) - ISLAMABAD: The Ministry of Commerce is reportedly weighing the potential impact of the India–European Union (EU) Free Trade Agreement (FTA) on Pakistan’s exports to EU member states.

Well-informed sources told Business Recorder that Pakistan’s embassy in Brussels has shared its analysis of the likely implications of the India–EU trade deal with the government.

“Textiles and garment sector of India will get tariff relief, which are likely to make our exports more competitive.

However, it will take at least another year for the deal to take effect. Our textile exports might get diverted to US due to favourable tariff treatment. Currently India is subjected to almost 10 percent tariff on textiles while we enjoy zero tariff under GSP+,” said an insider.

READ MORE: Dar urges EU firms to exploit Pakistan’s investment potential

The deal is likely to face opposition from EU s civil society if EU lowers its guard on “sustainability” related issues like environment and labour rights

Pakistan Textile Council (PTC) Chairman Fawad Anwar has expressed serious concern over the agreement’s repercussions for Pakistan’s export-oriented textile and apparel sector, warning that the country’s already fragile competitiveness in the EU market now faces an existential threat.

He said Pakistan currently exports approximately USD9 billion worth of goods to the European Union, of which nearly 65 percent consists of value-added textile and apparel products. “Even before the India–EU FTA, Pakistan’s competitive edge over India in the EU market was extremely thin and largely preference-driven. That narrow margin is now at serious risk,” he cautioned.

According to recent trade data, Pakistan’s total textile and apparel exports to the EU stood at USD6.2 billion in 2024, only marginally higher than India’s USD5.6 billion. “This gap was never structural,” Anwar noted. “It existed primarily because Pakistan enjoyed preferential access under GSP Plus, while India faced tariffs of up to 12 percent on apparel.”

“With the India–EU FTA granting zero-duty access to Indian garments across all tariff lines, that advantage has effectively disappeared,” he said. “At the same time, Pakistan’s GSP Plus status is under intense scrutiny, with the possibility of stricter conditions or even withdrawal. The combination of these developments places Pakistan’s EU exports in a highly vulnerable position.”

Anwar emphasized that India is now expected to rapidly expand its EU market share, supported not only by tariff elimination but also by lower energy costs, more competitive wage structures, strong support for man-made fibres and aggressive industrial incentive schemes. “In contrast, Pakistan’s exporters are being squeezed by uncompetitive energy tariffs, rising minimum wages disconnected from productivity, and a heavy and complex tax burden,” he added.

He warned that without immediate corrective measures, Pakistan risks losing hard-earned EU market share, particularly in value-added segments such as knitwear, woven apparel and made-ups, which form the backbone of industrial employment and foreign exchange earnings.

“The government must recognize that this is no longer a future risk — it is a present danger,” Anwar stressed. “If critical cost-of-doing-business issues are not urgently addressed, Pakistan’s $9 billion export relationship with the EU could erode rapidly, with severe consequences for jobs, investment and external account stability.”

The Chairman PTC called upon the Government to immediately: (I) Reduce tax incidence on export-oriented manufacturing; (ii) revisit wage policies to align them with productivity and competitiveness; (iii) rationalize industrial energy tariffs to regional benchmarks; and (iv) adopt an export emergency approach focused on retaining EU market share

“Preferential access alone cannot sustain exports,” he said, adding that without decisive domestic reforms, Pakistan will struggle to compete in a post-FTA EU market where efficiency, scale, and cost competitiveness — not sympathy — will determine sourcing decisions.”

Read more at https://www.brecorder.com/news/40404454/india-eu-fta-moc-weighing-potential-impact-on-exports