Trade with EU

The upcoming review of Pakistan's GSP+ status by the European Union marks a stressful moment for the country, as the preferential tariff agreement that almost single-handedly led to the Union becoming our biggest trading partner may be under threat due to concerns over several domestic governance and human rights issues. What some thought would be a done deal is now worrying pessimistic analysts because of recent comments by the EU Ambassador to Pakistan that the country needs to "do more" to comply with GSP+ conditions.

The standard 'stay out of our internal issues' excuse used by countries with problematic human rights records — including every country in South Asia — does not apply here because GSP+ status is directly conditioned on trading partners complying with 27 international conventions on human rights, labour rights, the environment and good governance.

The GSP+ arrangement, which Pakistan has been benefiting from since 2014, grants duty-free access to the EU market for 66% of all tariff lines. This has made the EU Pakistan's largest trading partner, with €6.2 billion of its total €8 billion in exports to the EU entering under these preferential terms in 2023. Key exports, such as textiles and apparel, have driven this growth, with overall exports to the EU rising from $5.1 billion in 2015 to $9.0 billion in 2024. The deepening trade relationship also supports millions of jobs across Pakistan.

But Islamabad remains far from meeting several conditions in those 27 conventions, especially in terms of human rights, labour standards and governance. On trade-related factors alone, the EU has already taken the preliminary step of suspending GSP+ preferences for Pakistani ethanol imports, citing market disruption. Next week's scheduled visit by an EU monitoring mission will thus be a critical moment for Pakistan's economy, as failure to explain away deficiencies in treaty obligations could be devastating for export-oriented sectors, which in turn would infect every other sector of the economy.