Commerce or Conscience? European Union's Balancing Act with Pakistan

When we talk about Pakistan, trade is not what we immediately think of; well, it comes naturally that the country is rather infamous for being enrolled in an economic crisis, surviving on loans and handouts by the IMF and its ‘AAKA’s from the Persian Gulf.

Illustration by The Geostrata

Rather than exporting goods and services, they export terrorism across the world. If we take a close look at their trade books, we can see that their aggregate annual exports stand at $ 36.5 billion for the financial year 2024-25, while their neighbour, India, whose a sole annual trade with the United States that stands at $ 212.3 billion.

Well, we are not trying to compare a “Dump Truck” with a “Mercedes”; we are trying to highlight the Pakistan-European Union Generalised Scheme of Preferences (GSP). The GSP stands for Generalised Scheme of Preferences, where the European Union provides a mechanism that provides a medium for poorer countries to sell more goods to Europe at lower tariffs.

It helps developing nations grow by boosting trade. Eligible countries qualify for this scheme if they are low or lower-middle-income, lack other EU trade deals, and show a commitment to improve labour, human rights, and good governance standards.

The EU and Pakistan signed an agreement for this in 2004, and subsequently it was upgraded to the GSP+ category in 2014.

Now the GSP+ upgrade gives Pakistan a complete exemption from tariffs on up to 66% exports to the EU; however, this upgrade requires a firm commitment by the recipient country to ratify and commit to 27 international conventions on human rights, labour rights, environmental protection and climate change, and good governance. 

Hence, the European Union is Pakistan's second most important trading partner after China, accounting for 12.4% of Pakistan's total trade in 2024, while Pakistan is the EU's 48th largest trading partner, accounting for 0.2% of EU Trade. 

Pakistan's exports primarily consist of garments, cotton and wearables, leather goods, agricultural produce like rice, lentils, fruits and vegetables, sports goods, and medical instruments.

While Pakistan imports high-value machinery and appliances, chemicals, and automobile parts, optical lenses, and high-value metals, which in turn Pakistan uses to manufacture surgical instruments, etc. This pattern obviously suggests that Pakistani exports are low-value yet high-volume commodities, and imports are rather capital-intensive. 

WHY DO TEXTILES DOMINATE THE EXPORTS?

Now one may have a question that why textile dominates the trade? Well, the textile industry forms a majority of Pakistan's total exports. During the fiscal year 2023-24, Pakistan exported textiles and apparel worth 17.8 USD billion, thus accounting for approximately 55% of the country’s total exports.

This can be attributed to the availability of abundant cheap labour forces, and the high production of cotton locally, etc.

Pakistan also has a huge pool of low-cost workforce, which is a result of demographic and economic factors. Their high population growth rate, with a significantly high ratio of young people, ensures an unhindered flow of labour, thus increasing competition for a limited number of formal jobs, coupled with high inflation, improper labour laws push wages to the lower spectrum. 

Cotton, which is the primary raw material needed to manufacture textiles, is the No.1 cash crop grown in Pakistan.

The country’s hot and dry weather, along with fertile Indus plains and planned irrigation systems from the Indus River, allows local farmers to grow cotton extensively without facing any issues. Hence, as a result, Pakistan produced 5.2 million bales of cotton in the year 2024-25. These two factors promote the large-scale manufacturing of textiles and apparel. 

MODES AND METHODS OF TRADE

Now we will try to understand how these goods move between Pakistan and the European Union.

The primary mode for this trade is via sea, with Port Bin Qasim and Karachi Port serving as the terminals for Pakistani exports bound for the EU. Around 85% of trade between Pakistan and Europe is conducted via sea through these ports. This sea trade is dominated by shipping companies such as Maersk, MSC, and HMM, which have a vast presence in both Pakistan and Europe.

While Pakistan does have its own fleet of cargo vessels, these are primarily dedicated to fulfilling domestic market needs.

In Europe, goods are offloaded at the primary sea hubs of Rotterdam, Hamburg, and Antwerp and are then distributed across the EU via an extensive rail and road network.

Some precious, fragile, or perishable cargo—such as gemstones, high-value agricultural produce, and surgical equipment—is transported via air by cargo carriers from China and the Middle East, as Pakistan does not have its own dedicated cargo airlines. 

DUALITY BY THE EUROPEAN UNION AND THE ISLAMIC REPUBLIC'S SYSTEMATIC DIVISION

But the essence of this article lies in the duality of this Arrangement. European unions’ General scheme of preferences (GSP)+  demands that the beneficiary nations ratify and actively work to improve their policies on sustainability and good governance.

The eligible countries have to implement 27 international conventions on Human and Labour rights, measures toward good governance, and environmental sustainability. 

Along with Pakistan, Srilanka, Cabo Verde, Kyrgyzstan, Mongolia, Bolivia, the Philippines, and Uzbekistan are recipients of GSP+ benefits. 

But we can clearly see that Pakistan has not improved on the aforementioned clauses of the scheme. Pakistan continues to rank among the lowest in the world when it comes to human rights, minority rights, and gender equality.

Pakistan continues to be grappled with a severe and multifaceted human rights crisis, where ethnic and religious minorities face systematic persecution.

In provinces like Sindh, young Hindu girls are systematically targeted for forced conversions and child marriage, a crime that mostly goes unpunished.

The Islamic Republic’s draconian blasphemy laws are frequently weaponised, not to protect religious sentiment but to settle personal vendettas or persecute minorities like Christians and Hindus with false accusations, leading to mob violence and lengthy prison sentences; I mean, who can forget Asia Bibi’s case?

The Ahmadiyyas are constitutionally declared non-Muslim by the State and face intense persecution, while Shia Muslims, who constitute 10-15% Muslims, are often targeted by extremist violence in the Sunni-majority nation. 

This crisis further extends to ethnic domination, where the Punjabis and Sindhis majorities, control political and economic power, marginalising groups like the Pashtuns and Balochis. This is more evidently visible in Balochistan.

Despite being the country's most resource-rich province, it remains its poorest and least developed region.

But why? Decades of resource exploitation without local benefit have fueled a nationalist insurgency, which the state has met with brutal force, including a campaign of enforced disappearances and extrajudicial killings. 

The Pakistani State has continued resource exploitation for decades, ignoring the welfare of the locals, which has in turn caused a catalyst for Baloch Nationalism and insurgency, and the state deals with it with brutal force, which often includes a series of enforced disappearances and extrajudicial killings. 

This complex web of religious intolerance and ethnic suppression paints a grim picture of the struggle for basic rights and justice in Pakistan. The bloodshed in Dhaka and the separation of East Pakistan in 1971 is a staunch evidence of the ethnic instability of Pakistan. 

HOW ARE OTHER GSP+ MEMBERS DOING?

So when we compare Pakistan’s peers in this GSP+ program, they are on a path of improving their practices on these conventions, especially Uzbekistan, which dissolved the law that enabled child labour in cotton fields, decentralisation of the state economy, and Sri Lanka, which amended the Prevention of Terrorism Act to reduce judicial oversight and harsh treatment of suspects. 

And these countries have also made significant progress in their economy and finances, promoting a stable and secure nation. Whereas Pakistan, despite profiting from GSP+ tariff benefits, has worsened human rights and entrenched its economy into deeper trouble. 

THEN WHY DOES THE EU STILL ENTERTAIN PAKISTAN?

It is natural that you may ask, then why does the European Union continue to include Pakistan under its GSP+ program despite it falling short of respecting the guidelines? 

Pakistan continues to fall short of the minimum requirement guidelines laid by the Union, despite these factors; The European Union continues providing the GSP+ benefits to Pakistan.

The answer is its strategic location. Pakistan lies at the crossroads of South Asia, Central Asia, the Middle East, and East Asia. It gives lucrative access to the EU, NATO, and the United States, providing access to these regions.

During the American occupation of Afghanistan, all the logistic lines between the United States and Afghanistan were routed through Pakistan. On the other hand, China is in full swing to increase its influence in the region via its CPEC (China-Pakistan Economic Corridor).

Hence, the EU feels it is necessary to keep Pakistan in its loop via the GSP+, and doing otherwise may push Pakistan more towards the Chinese spectrum of influence.

Even if the EU decides to withdraw Pakistan from membership, it would impact its economy as Pakistan-EU, EU trade comprises 28% of total Pakistani exports.

On the larger scale, it will significantly reduce Pakistani foreign reserves, raise unemployment, and the EU may lose cooperation with Pakistan on matters of regional Security.

Technically, this GSP+ program for Pakistan was due to expire by the end of 2023; however, the European Parliament overwhelmingly voted to extend the current regulation till the end of 2027. 

THE INDIA POV

Over the years, New Delhi has avoided directly opposing the EU Pakistan GSP+ program, but Indian analysts and diplomats have often highlighted the EU’s double standards, as the EU does preach about human rights but continues to overlook Pakistan’s systematic abuse of it as the revenues earned by Pakistan can be used by them to spread insurgency and fund terrorism in the Indian Subcontinent. 

In essence, Pakistan’s GSP+ status reflects Europe’s Dilemma between principles and pragmatism. While the scheme does sustain Pakistan’s fragile economy, it also exposes the EU’s selective silence on Human rights abuses. True progress demands that trade incentives align with values; otherwise, GSP+ risks becoming a shield for impunity rather than a tool for social reforms.

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BY SAMARTH VIJAY KHANDEKAR

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