EU-Pakistan bilateral trade relations are governed by the Cooperation Agreement from 2004. Enhancing bilateral trade and investment is also part of the EU-Pakistan 5-year Engagement Plan from 2012.
Pakistan is a major beneficiary of the trading opportunities offered by the EU Generalised Scheme of Preferences (GSP). From 1 January 2014 Pakistan benefits from generous tariff preferences (mostly zero duties on two thirds of all product categories) under the so-called GSP+ arrangement aiming to support sustainable development and good governance. In order to maintain GSP+ Pakistan has to keep ratification and effectively implement 27 core international conventions on human and labour right, environmental protection and good governance.
Trade picture
The EU is Pakistan's most important trading partner, accounting for 12.8% of Pakistan's total trade in 2015 and absorbing 23.7% of Pakistan's total exports.
In 2016, Pakistan was the EU's 41th largest trading partner in goods accounting for 0.3% of EU trade.
Pakistani exports to the EU are dominated by textiles and clothing, accounting for 82% of Pakistan's total exports to the EU in 2016.
Pakistan's imports from the EU are mainly comprised of machinery and transport equipment (40.2% in 2016) as well as chemicals (19.5% in 2016).
From 2006 to 2016, EU28 imports from Pakistan have almost doubled from €3,319 to €6,273 million. The growth of imports from Pakistanhas been particularly fast since the award of GSP+ (€5,515 million in 2014).
The EU and Pakistan have set up a Sub-Group on Trade to promote the development of two-way trade. The Sub-Group on Trade - set up under the auspices of the EU-Pakistan Joint Commission - is the forum for discussions on trade policy developments more broadly and also aims to tackle individual market access issues which hamper trade between the two parties.
While Pakistan's economy holds considerable potential, high costs of doing business, complex regulation and infrastructure bottlenecks all have a detrimental effect on trade and growth. Pakistan's trade regime and regulatory environment still remain comparatively restrictive.
Textiles and clothing account for over 80% of Pakistan's exports to the EU. While the textiles and clothing industry are the backbone of Pakistani exports, relying so heavily on one product category carries risks for Pakistan. Trade diversification would play an essential role in this respect. The granting of GSP+ preferences in 2014 should stimulate Pakistan's efforts towards diversification