Malik Waqar
Pakistan’s textile sector and broader export landscape have long celebrated the European Union’s Generalised Scheme of Preferences Plus (GSP+) as a lifeline — a duty-free gateway to the EU market that has nearly doubled our exports over the last decade. But what has felt like a permanent entitlement is actually a time-bound privilege with rising conditions — and Pakistan is dangerously unprepared for what’s ahead.
Temporary Relief, Growing Risks
When the EU extended Pakistan’s GSP+ status until 2027, government offices and industry associations in Islamabad proudly released statements of victory. Yet behind the public praise lies a stark reality: Europe’s expectations are tightening, and Pakistan’s compliance record is lagging.
GSP+ wasn’t just about exporting more — it was about meeting human rights, environmental, and trade governance standards. While Islamabad points to the number of international conventions ratified, Brussels is increasingly focused on implementation, enforcement, and accountability rather than signatures on paper.
Exports Have Grown — But So Has the Competition
There’s no denying that GSP+ boosted Pakistan’s foreign exchange earnings. Exports to the EU soared from around $4.7 billion in 2014 to nearly $9 billion by the last fiscal year. The EU now takes almost 28% of Pakistan’s total exports.
Yet competitors like Vietnam have left Pakistan behind. In 2023 alone, Vietnam’s shipments to the EU topped $50 billion, and it did so by diversifying into electronics, machinery and higher-value textile segments, while Pakistan remains heavily reliant on basic cotton products.
Europe Is Changing — And So Are the Rules
Europe’s economic landscape has shifted. Rising protectionism and new regulations — such as the Corporate Sustainability Due Diligence Directive — mean that European buyers must now ensure their supply chains meet strict environmental and human rights standards.
For Pakistani exporters, this raises the stakes dramatically. A textile mill in Faisalabad that violates labor or environmental norms won’t just face scrutiny at home — European firms could be held legally liable for sourcing from them.
Energy Costs and Competitiveness
On top of compliance risks, Pakistan’s high industrial energy costs are squeezing exporters. At roughly 13.2 cents per kWh, local power tariffs far exceed rates in Vietnam, India and Bangladesh — eroding Pakistan’s duty advantage and making its products less competitive.
Addressing this isn’t just about negotiating energy supplies; it requires policy reforms — decoupling industrial rates from residential subsidies, restoring automated tax refunds, and promoting modernization across textile value chains.
Time Is Running Out
GSP+ isn’t guaranteed beyond 2027. And even if Pakistan re-qualifies, the rules will be tougher. Failure to meet evolving standards would strip our exporters of duty-free access, potentially triggering economic shockwaves across textile hubs and manufacturing sectors.
Diplomacy can buy time — but it can’t replace domestic reforms. What Pakistan needs now is a shift from complacency to urgency: strengthening rule of law, protecting rights in practice, improving industrial competitiveness, and engaging with international partners not as beneficiaries of charity, but as responsible contributors to global trade.
