New Delhi / Brussels / Islamabad — The historic Free Trade Agreement (FTA) between India and the European Union (EU) — described by Indian officials as the “mother of all trade deals” — has triggered significant concern in neighbouring Pakistan, where officials and industry leaders warn the pact could undercut the country’s export competitiveness in Europe, according to reports.
The FTA, finalised by the two sides after years of negotiations, dramatically expands market access between India and the 27-member EU. Under the agreement, the EU will phase out tariffs on 99 % of goods imported from India over seven years, while India will cut or eliminate duties on 97 % of EU products. This liberalisation comes at a moment when Indian exporters, especially in textiles, apparel, gems and footwear, are seeking new global opportunities after facing elevated trade barriers in other markets, reported India Today.
As part of the FTA, the EU will now eliminate or reduce tariffs on 99% of goods imported from India over seven years. India, on its part, will do away with or cut tariffs on 97% of EU shipments, reported India Today.
Pakistan’s Competitive Edge at Risk
The timing of the India-EU FTA could be more concerning and unsettling for Pakistan, according to experts. According to a World Bank report, Pakistan’s export share has fallen from 16% of GDP in the 1990s to about 10% in 2024, reported India Today.
Pakistan’s economy, already struggling with poorly performing exports and a declining share of global trade, has long relied on preferential access to the EU market under the Generalised System of Preferences Plus (GSP+) scheme. This programme grants duty-free entry on roughly two-thirds of tariff lines, a benefit that helped Pakistan’s textile shipments to the bloc more than double after its inclusion in 2014.
But with India now securing near-complete duty-free access in the same market, Pakistani exporters fear their longstanding advantage will be eroded. The EU absorbs a significant portion of Pakistan’s export output — around $8.8 billion (27 % of total exports), according to industry estimates — particularly in textiles and apparel, which form the backbone of its export earnings.
Industry leaders in Pakistan warn that India’s new tariff position could lead to aggressive price competition in European markets, potentially displacing Pakistani goods and shrinking market share. Analysts say the competitive pressure could extend beyond textiles to other labour-intensive sectors as well.
Business groups such as the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) have called the India-EU FTA a “serious challenge” that could erode Pakistan’s export base and prompt job losses unless corrective measures are taken. They have urged the government to expand incentives for exporters, reduce production costs and enhance competitiveness.
At the same time, the India-EU deal positions New Delhi to tap into a massive market with reduced barriers, launching Indian products into high-value export corridors and deepening economic ties with Western partners. For Europe, the agreement strengthens access to one of the world’s fastest-growing economies and diversifies supply chains amidst global trade tensions.
Also tough days for Bangladesh
For Bangladesh, which currently exports garments duty-free to Europe, there will be challenges and stiff competition. Its garment shipments will now face tougher competition, analysts believe. This aspect was highlighted by Union Minister Piyush Goyal during his press briefing after the India-EU deal that was finalised recently, reported India Today.
“All these years, there have been questions of why Bangladesh earns $30 billion in exports to the EU, and India cannot do it. It was because Bangladesh, being a Least Developed Country (LDC), had zero duty,” Goyal said.
