India’s long-awaited Free Trade Agreement (FTA) with the European Union, signed in New Delhi on January 27 after nearly two decades of negotiations, is being seen as a game-changer for global trade, and a serious cause of concern for Pakistan. Dubbed the “mother of all deals,” the pact links two massive economies that together account for nearly 25% of global GDP and serve a market of around two billion people.
The agreement gives Indian exporters sweeping duty-free access to the 27-nation EU bloc, significantly altering competitive dynamics in sectors such as textiles, apparel, pharmaceuticals, and other labour-intensive industries. For years, Pakistan enjoyed a clear advantage in the European market due to its GSP+ status, which allowed zero-duty access on nearly 66% of its export lines. Indian exporters, by contrast, faced tariffs ranging from 9% to 12%.
That advantage now stands largely neutralised. With India set to gain near-zero tariffs on almost 95% of its labour-intensive exports, Pakistan’s pricing edge is eroding fast. The situation is further complicated by the fact that Pakistan’s GSP+ status, granted in 2014, is due to expire in December 2027, raising fears of a double blow to its export economy.
Pakistan’s business leaders have sounded the alarm. Textile industry representatives warn that once India becomes fully competitive in the EU market, regaining lost ground will be extremely difficult. Former commerce minister Gohar Ejaz has gone further, cautioning that millions of jobs could be at risk unless Pakistan urgently reforms energy pricing, taxation, and financing costs to help industry compete.
Islamabad says it is engaging both EU member states and authorities in Brussels to mitigate the fallout. However, with the EU remaining Pakistan’s largest export destination, the pressure is mounting.
For India, the deal promises cheaper imports of European luxury goods and a massive boost to exports. For Pakistan, it marks the end of a long-standing comfort zone and the start of a tough economic recalibration.
