The signing of the Free Trade Agreement (FTA) between India and the European Union (EU) on January 27 has sent shockwaves through Pakistan's industrial sectors. This comprehensive deal, often referred to as the 'Mother of All Deals,' unites two major economic powers representing nearly 25% of the global GDP and a shared market of approximately 2 billion people. For Pakistan, which has long relied on preferential trade status with the EU, this agreement represents a significant shift in regional trade dynamics and competitive advantage.
The End of Pakistan's 'Zero-Tariff Honeymoon'
Former Pakistani Commerce Minister Gohar Ejaz has voiced grave concerns regarding the implications of the India-EU FTA. In a public statement, he noted that Pakistan's 'zero-tariff honeymoon' with the European market is effectively over. Ejaz estimated that approximately 10 million jobs within Pakistan's export-oriented industries are now at risk. He emphasized that the Pakistani government must urgently provide industries with affordable electricity, reduced taxation, and accessible credit to remain competitive against Indian exports which will soon enjoy similar or better tariff benefits in Europe.
Textile Sector and the Shift in Competitive Edge
The textile industry, the backbone of Pakistan's exports, faces the most direct threat. Since 2014, Pakistan has benefited from the EU's GSP Plus status, allowing duty-free access for 66% of its products. In contrast, Indian textile exporters previously faced tariffs ranging from 9% to 12%. 2 billion. With the new FTA, nearly 95% of India's labor-intensive products will gain duty-free access, eliminating Pakistan's primary competitive advantage and potentially leading to a massive diversion of trade orders toward India.
Impact on Indian Markets: Luxury Cars and Wine
While the deal poses challenges for Pakistan, it offers significant benefits for the Indian consumer market. Under the FTA, the Indian government has agreed to slash import duties on European luxury cars from 110% to just 10%. 5 lakh units. Plus, tariffs on European wines and spirits, currently as high as 150%, are expected to be reduced to a range of 20-30%. While many luxury brands like BMW and Mercedes-Benz assemble cars locally in India with lower duties, the FTA will Notably lower the cost of high-end completely built units (CBUs).
Reactions from Industrial Bodies and Diplomats
Industrial leaders in Pakistan have expressed urgent concern over the developments. Kamran Arshad, head of the All Pakistan Textile Mills Association (APTMA), stated that India has now become Notably more competitive in the European market. Sakib Fayyaz Magoon, Vice President of the FPCCI, warned that once market share is lost to a competitor like India, reclaiming it's an uphill task. Meanwhile, Pakistan's Foreign Ministry spokesperson, Tahir Andrabi, confirmed that the government is in talks with Brussels to extend the GSP Plus status beyond its current expiration in December 2027 to mitigate the impact.
Analytical Perspective and Future Implementation
According to trade analysts, the India-EU FTA, which took 18 years of negotiations to finalize, is expected to be fully implemented by 2027. The agreement is seen as a strategic move by India to integrate more deeply with Western economies, while for Pakistan, the challenge lies in its internal economic stability; analysts suggest that without structural reforms in energy costs and tax frameworks, the country may struggle to compete with India's newly gained tariff-free status. The deal marks a pivotal moment in global trade where India's manufacturing scale meets Europe's high-value consumer market.