The EU-Pakistan trade relationship is complex and multifaceted, with both countries playing significant roles in global trade. Pakistan's exports to the EU account for 30% of its global trade, making the EU its largest export destination. The EU's preferential trade scheme, GSP+, has been a crucial factor in Pakistan's increased exports to the EU, allowing it to export thousands of products with reduced tariffs.
However, the program comes with conditions, including good governance, environmental protection, and labor and human rights. Pakistan must continue to implement these conventions to maintain access to the EU market. Furthermore, new trade deals are emerging, and India and the EU have signed a free trade agreement (FTA), which could create new competition for Pakistan.
Pakistan's economy is heavily reliant on textiles, which dominate its exports, followed by leather goods and agricultural articles. To grow, Pakistan needs to move up the value chain and diversify its exports. This requires a structural change in the trading profile of Pakistan, with a greater emphasis on manufacturing and outsourcing. Trade isn't shaped by economics alone, and the war in Iran has created new opportunities for Pakistan, including increased port activity at Karachi.
