Pakistan’s textile and apparel exports to the European Union are facing mounting pressure following the conclusion of the India-EU Free Trade Agreement, a development that has significantly altered the competitive landscape in one of Pakistan’s most important export markets. The agreement removes India’s long-standing tariff disadvantage, effectively eroding Pakistan’s preferential edge in the EU and raising concerns about the sustainability of export growth in the coming years.
According to the Pakistan Textile Council (PTC), the shift poses a serious risk to Pakistan’s export performance, particularly because the country’s previous competitiveness in the EU market was largely driven by preferential access rather than deep-rooted structural strengths. With tariffs on Indian garments now eliminated, the margin separating the two regional competitors has narrowed to a level that places Pakistan’s exporters in a vulnerable position.
PTC Chairman Fawad Anwar highlighted that Pakistan exports approximately $9 billion worth of goods to the European Union, with nearly 65% consisting of value-added textile and apparel products. These segments form the backbone of the country’s manufacturing exports and are closely linked to employment generation and foreign exchange earnings. Any disruption in this market could therefore have wide-ranging economic implications.
Recent trade data underscores the intensity of competition between Pakistan and India in the EU market. Pakistan’s textile and apparel exports to the EU stood at $6.2bn in 2024, only slightly higher than India’s $5.6bn during the same period. This narrow gap illustrates how limited Pakistan’s buffer has become, especially now that India enjoys tariff-free access under its trade agreement with the EU.
The situation is further complicated by uncertainty surrounding Pakistan’s GSP Plus status, which remains under close review. While the preference scheme has historically supported Pakistan’s access to the European market, the potential for stricter scrutiny adds another layer of risk for exporters already facing cost and policy pressures. Together, these factors have placed Pakistan’s EU-bound textile exports in a highly sensitive position.
Industry observers note that India is well positioned to gain market share in the EU due to a comparatively stronger cost structure. Lower energy prices, relatively flexible wage conditions, targeted support for man-made fibres, and consistent industrial incentive policies have enhanced India’s attractiveness as a sourcing destination for European buyers. These advantages are expected to translate into increased orders for Indian manufacturers at the expense of competing suppliers.
In contrast, Pakistan’s exporters continue to grapple with persistent challenges. High energy tariffs, rising wages that are not aligned with productivity growth, and a complex tax regime have collectively increased the cost of doing business. These factors have weakened price competitiveness, particularly in value-added segments such as knitwear, woven apparel, and made-ups, where margins are already under pressure.
The Pakistan Textile Council has warned that without timely corrective action, the country risks losing a significant share of the EU market in these critical segments. Such a loss would not only affect export revenues but also have broader consequences for employment and industrial capacity utilization across the textile value chain.
In response, the PTC has urged the government to adopt an emergency export-focused strategy aimed at safeguarding Pakistan’s position in the European market. Key recommendations include reducing the overall tax incidence on export-oriented industries, aligning wage policies with productivity levels, and rationalizing industrial energy tariffs to bring them closer to regional benchmarks.
The council has emphasized that restoring competitiveness requires coordinated policy action rather than short-term relief measures. By lowering structural costs and improving the business environment, Pakistan could strengthen its export base and reduce reliance on preferential access alone. As competition in global textile markets intensifies, the outcome of these policy decisions is likely to play a decisive role in shaping the future trajectory of Pakistan’s textile exports.
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