EU-India deal a wake-up call, say exporters

2026-01-30 - 02:36

KARACHI: Exporters and analysts fear that the EU-India Free Trade Agreement (FTA) will pose serious challenges to Pakistan’s export base and hurt its textile exports. An office-bearer of a traders’ association said India “has now opened an economic front”, after facing defeat on the battlefield, by signing trade deals with several countries and the European Union. Saquib Fayyaz Magoon, chairman of the Businessmen Panel Progressive (BMPP) and vice president of the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), cautioned that the agreement could erode Pakistan’s competitive edge in European markets. Despite Pakistan’s GSP Plus status, which allows duty-free access for nearly 80 per cent of its exports to the EU, the country’s textile exports stand at $6.2 billion, marginally ahead of India’s $5.6bn exports even though the latter faces a 12 per cent tariff. “Once India secures zero-rated access under the EU deal, Pakistan’s advantage will vanish and our exports could suffer a severe blow,” Saquib Magoon warned. Traders fear Pakistan could lose its ‘competitive edge’ if govt doesn’t take urgent measures He feels Pakistan could lose its foothold in the European market if urgent corrective measures are not taken. “Once a market is lost, regaining entry becomes extremely difficult,” he said, urging the government to act decisively. Magoon called for reducing power tariff to nine cents per unit, simplifying the tax regime, and offering incentives to exporters. “The government must declare an export emergency and adopt industry-friendly policies to safeguard the country’s economic interests.” Drawing a parallel with military success, Mr Magoon observed: “Just as the armed forces secured victory on the battlefield, the business community now needs government support to win this economic war.” A representative of JS Global said the EU and India had concluded the agreement after two decades of negotiations. Its upshot is that India’s textile and garment products would now “enjoy a reduction, or even elimination of tariff altogether, in EU states”. India’s textile and garment exports are currently subject to an eight to 12pc tariff under the GSP regime (which was suspended last week), while Pakistan enjoys zero tariffs under the GSP Plus status. With the FTA now in place, Pakistan is likely to lose its advantage, which was already thin, as India benefits from higher value addition and “vertical integration”, JS Global said. The company fears the deal would hit Pakistan’s exports, 24pc of which go to the EU. The bloc remains the top destination for textile exports after the USA. Price undercutting Faisal Arshad, who heads the Hosiery Manufacturers and Exporters Association (PHMA), said India-EU FTA could lead to aggressive price undercutting by Indian exporters in the EU market, an erosion of Pakistan’s market share in hosiery, knitwear, and value-added garments. This would have a knock-on effect in the form of an increased pressure on export margins, employment, and sector sustainability. He cautioned that Pakistan’s reliance on GSP+ alone is no longer sufficient to safeguard its exports. “Tariff-free access without recognition of compliance and cost burdens creates an uneven playing field. “Pakistan must not be disadvantaged for adhering to international conventions while competing with countries that do not face similar obligations,” Faisal Arshad said. The PHMA chief urged the government to immediately take corrective measures, including rationalisation of power tariffs for export-oriented industries, provision of competitive financing and export refinancing schemes. “If India secures FTA access while Pakistan’s structural cost disadvantages remain unaddressed, our textile exports will suffer,” he said. “Strategic and timely policy intervention is essential to protect exports and jobs.” Tough conditions According to Mr Arshad, Pakistan’s GSP+ access comes with strict conditionalities. “We are required to ratify, implement, and continuously report on compliance with 27 international conventions related to human rights, labour standards, environment, and governance.” In contrast, the PHMA chairman observed, India’s market access under the FTA does not carry the same obligations. He said Indian manufacturers benefit from cheaper energy, lower financing costs, large-scale manufacturing, integrated supply chains, and stronger logistics infrastructure. “When tariff equality is combined with lower production costs and fewer compliance obligations, the competitive gap widens substantially against Pakistan,” Faisal Arshad added. Published in Dawn, January 30th, 2026