The recently concluded European Union–India Free Trade Agreement (FTA) has triggered visible anxiety in both Pakistan and Bangladesh, as exporters in the two countries fear that the deal will steadily erode the preferential advantages they have long enjoyed in the highly lucrative European market. With Indian goods set to gain expanded and largely duty-free access to Europe, traders in Islamabad and Dhaka worry that New Delhi is poised to emerge as a far more formidable competitor, particularly in labour-intensive sectors such as textiles and garments.
The unease has been openly articulated by Pakistani trade representatives, with one office-bearer of a traders’ association telling the Pakistani daily Dawn that India had effectively “opened an economic front” against Pakistan. The remark drew a pointed parallel with Operation Sindoor, suggesting that India’s strategic contest with Pakistan was now extending into the economic and trade domain as well.
For decades, both Pakistan and Bangladesh have benefited from special preferential access to the European market through EU trade schemes. Pakistan has enjoyed significant advantages under the Generalised Scheme of Preferences Plus (GSP+), while Bangladesh, as a Least Developed Country, has been a major beneficiary of the Everything But Arms (EBA) arrangement. These frameworks allowed exporters from both countries to send goods—especially textiles and apparel—to Europe with either reduced or zero tariffs, giving them a strong competitive edge over Indian exporters.
As a result, Europe has become Pakistan’s second-largest export market outside Asia and Bangladesh’s single most important export destination. Textile and clothing exports form the backbone of this trade, accounting for a substantial share of foreign exchange earnings in both countries. The concern now is that the EU–India FTA, by granting Indian goods duty-free or near-duty-free access to as much as 93% of Indian exports to Europe, will significantly narrow or even eliminate this advantage.
From Pakistan’s perspective, trade relations with the EU are currently governed by the 2004 Cooperation Agreement, supplemented by the EU–Pakistan five-year Engagement Plan adopted in 2012. Since 2014, Pakistan has benefited from GSP+ status, which allows duty-free access for nearly 85% of its exports to the EU, subject to compliance with 27 international conventions covering human rights, labour standards, environmental protection and governance. According to the European Commission, the EU accounted for 12.4% of Pakistan’s total trade in 2024, with bilateral goods trade valued at around €12 billion. Textiles and clothing made up nearly three-quarters of EU imports from Pakistan during that year.
Bangladesh’s dependence on Europe is even more pronounced. Having enjoyed LDC status since 1975, Bangladesh has been the single largest beneficiary of the EBA scheme, with €17.1 billion worth of exports receiving preferential treatment in 2023 alone. In 2024, total EU–Bangladesh trade in goods stood at €22.2 billion, with garments accounting for almost 94% of EU imports from Bangladesh. However, Bangladesh’s situation is further complicated by the fact that it lost its LDC status in November 2025 and is set to lose EBA benefits within three years, making India’s tariff-free entry into the EU market even more threatening.
By contrast, Indian exports to Europe historically operated at a disadvantage. Until recently, Indian goods entered the EU under Most Favoured Nation (MFN) tariff rates, which imposed duties of around 12% on textiles and as high as 26% on marine and seafood products. Despite these barriers, India–EU trade expanded by nearly 90% over the past decade. In 2024, the EU emerged as India’s largest trading partner, with goods trade worth €120 billion, representing 11.5% of India’s total trade.
Once ratified—likely by 2027—the EU–India FTA is expected to accelerate this trend dramatically. The agreement предусматривает the elimination of roughly 90% of tariff lines, covering about 91% of trade value, which is expected to strongly benefit labour-intensive Indian sectors such as textiles, garments, footwear, leather goods and jewellery. Industry estimates cited by Reuters suggest that India’s apparel exports to the EU could grow by 20–25% annually, potentially helping the sector reach a $100 billion export target by 2030.
This prospect has deeply unsettled exporters in Pakistan and Bangladesh. Saquib Fayyaz Magoon, vice president of the Federation of Pakistan Chambers of Commerce and Industry, warned that once India secures zero-rated access, Pakistan’s competitive edge in Europe could disappear entirely. He cautioned that losing market share in Europe could be extremely difficult to reverse and called for urgent government intervention, likening the challenge to an “economic war” that would require state backing.
Similar concerns have been raised by industry representatives such as Faisal Arshad of Pakistan’s Hosiery Manufacturers and Exporters Association, who warned that Indian exporters could aggressively undercut prices once tariffs are removed, rendering Pakistan’s reliance on GSP+ insufficient. He argued that tariff-free access without accounting for compliance and cost burdens would create an uneven playing field.
In Bangladesh, analysts and exporters have expressed equally grave concerns. Mustafizur Rahman of the Centre for Policy Dialogue told The Daily Star that India’s duty-free access would significantly weaken Bangladesh’s competitiveness, particularly in apparel. Factory owners exporting primarily to Europe echoed these fears, warning that if Bangladesh is forced to pay duties while competitors do not, buyers will inevitably push prices down or shift orders elsewhere.
Taken together, the EU–India FTA signals a potential structural shift in Europe’s trade landscape. While Pakistan and Bangladesh have long anchored their export strategies in preferential regimes, India’s entry into the European market on near-equal tariff terms introduces a powerful new rival. Unless Islamabad and Dhaka respond swiftly through diplomatic engagement, diversification of exports, and stronger industrial support, their long-standing advantages in Europe risk being steadily eroded in the years ahead.
