The recently concluded free trade agreement between India and the European Union is raising growing concern in Pakistan, where industry representatives and officials warn that the deal could undermine the country’s textile sector, the backbone of its export economy, and put millions of jobs at risk.
The agreement, announced on January 27 after the conclusion of negotiations, is currently undergoing legal review before formal signing and is expected to be implemented next year. Under terms disclosed so far, India would gain sweeping tariff-free access to the EU market, combined with greater value addition and vertical integration, advantages that Pakistani stakeholders say could reshape competition and attract future investment to Indian textile clusters.
Pakistan’s economy is heavily dependent on the European market. EU member states purchase nearly $8.8 billion of Pakistani goods, about 27% of total exports, including roughly $7 billion in textiles alone, according to trade data cited by industry bodies. In comparison, India directs a smaller share of its exports to the EU, making Pakistan far more exposed to potential shifts in European sourcing.
Since 2014, Pakistan has benefited from significant tariff advantages under the EU’s Generalised Scheme of Preferences Plus (GSP+), which grants duty-free access in exchange for commitments on labour rights, human rights, and governance. Pakistan currently enjoys duty-free access to around 66% of EU tariff lines, but under the India-EU FTA, India would immediately gain tariff-free access across all textile and apparel categories, eliminating much of Pakistan’s previous price advantage.
Analysts warn that even small shifts in EU sourcing toward India could have major consequences for Pakistani factories. Sector estimates suggest a 15% decline in Pakistan’s EU textile market share could translate into losses of around $1.5 billion. EU buyers in this price-sensitive market may reallocate orders to India, compressing margins, reducing repeat business, and increasing per-unit costs for Pakistani mills.
The shift also exposes Pakistan’s domestic vulnerabilities. Industrial electricity tariffs are 25–30% higher than regional competitors, and ongoing compliance costs under GSP+, linked to 27 conventions on labour, human rights, environment and governance, may become a competitive burden if India gains similar tariff benefits without equivalent compliance obligations.
Textiles dominate Pakistan’s exports to Europe and are labor-intensive. Some industry estimates suggest that up to 10 million jobs could be affected if Pakistan loses market share. Declining exports would also pressure foreign exchange reserves and the balance of payments, while forcing factories to cut shifts, delay wage increases, or reduce staff.
Pakistan’s authorities are monitoring the situation closely. The Foreign Office has said it is reviewing the implications while reaffirming that GSP+ remains a “win-win” framework, and the Ministry of Commerce is assessing potential impacts on exports. The Pakistani embassy in Brussels has shared its evaluation with the government, underscoring that the issue is being treated as an active economic and policy challenge.
Even incremental shifts in European sourcing toward India could therefore disproportionately affect Pakistan’s textile-dependent industrial base, with knock-on effects on employment, currency stability, and the wider manufacturing ecosystem.
