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India-EU Free Trade Deal Could End Pakistan’s Preferential Access to Europe
The India-EU Free Trade Agreement (FTA) has become a source of concern for Pakistan. This landmark agreement will grant India duty-free access to the European market, eroding Pakistan's long-standing trade advantage. Pakistan fears that its GSP+ status could also be lost, impacting millions of jobs. India's labor-intensive products will receive a major boost, while European luxury products will become cheaper.
The historic Free Trade Agreement (FTA) signed between India and the European Union (EU) on January 27th has become a major cause for concern for Pakistan. This agreement, which has come about after nearly two decades of negotiations, has been termed the "Mother of All Deals."
This agreement brings together two significant economies that represent almost one-quarter of the world’s population and 25 percent of world GDP.
Pakistan is concerned that this agreement will take away its traditional trade advantage in the European market. Pakistan has also sought meetings with EU officials to understand the impact of this agreement on its exports.
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According to media reports, Pakistan has previously benefited significantly under the EU's GSP+ (Generalized Scheme of Preferences Plus) scheme. Under this scheme, approximately 66 percent of its export products were subject to zero duty in Europe, especially textiles and ready-made garments.
On the other hand, India was required to pay a duty of 9-12 percent on the same products. Still, the exports made by India were almost equal to those made by Pakistan. While Pakistan exports $6.2 billion to Europe, India's share was $5.6 billion.
The new India-EU FTA will eliminate this gap. Once the agreement is implemented, India will also gain almost complete duty-free access to the European market, eliminating Pakistan's price advantage.
Pakistan's troubles don't end there. The EU granted Pakistan GSP+ status in 2014, which expires after December 2027. If this agreement is not extended, Pakistan's special privileges in Europe could be completely eliminated. The EU is Pakistan's largest export market, so the impact is considered serious.
Pakistani industry organizations say that India has now become more competitive in the European market. Kamran Arshad, head of the All Pakistan Textile Mills Association, said that India could overtake Pakistan in many sectors. Meanwhile, former Pakistani Commerce Minister Dr. Gohar Ejaz has warned that if the situation does not improve, approximately 10 million jobs could be at risk.
After the implementation of this agreement, approximately 95% of India's labor-intensive products will gain duty-free access to the EU. This will provide a major boost to India's textile, apparel, and other export sectors. In turn, luxury cars and wine imported from Europe to India could become cheaper.
