Pakistan's textile and apparel sector, faces a critical juncture as the European Union (EU) scrutinizes its commitment to human rights and governance under the Generalised Scheme of Preferences Plus (GSP+). Recent statements from EU officials, while acknowledging Pakistan's progress and its status as the largest GSP+ beneficiary, also carry a stark warning: continued trade benefits hinge on demonstrable progress on human rights and other key areas. This uncertainty casts a long shadow over the sector, raising concerns about potential economic fallout should the preferential trade access be revoked.

The stakes are high

GSP+ provides significant advantages to Pakistan's exports, particularly in the textile and garment sector. Zero-rated or preferential tariffs on nearly 66 per cent of tariff lines have led to a substantial increase in exports to the EU market. Between 2014 and 2022, Pakistan's exports to the EU rouse by 108 per cent, reaching €14.85 billion, with textiles playing a dominant role. The sector contributes significantly to Pakistan's GDP, employs millions of workers, and is a crucial source of foreign exchange. Withdrawal of GSP+ would not only impact export volumes but also reverberate throughout the entire value chain, affecting employment, investment, and overall economic stability.

The EU's concerns

While the EU acknowledges Pakistan's economic significance and its positive trajectory in some areas, the emphasis on human rights and rule of law remains paramount. The EU's concerns, though not explicitly detailed in recent statements, are around freedom of speech, rights of minorities, labor rights, and the implementation of international conventions related to these areas. Ambassador Skoog's statement underscores the need for "tangible reforms" and continued progress on these issues as Pakistan prepares for reapplication under the new GSP+ regulation.

What's at stake 

For Pakistan a lot is at stake primarily it could lead to economic losses as reduced export earnings, job losses, decreased investment, will have negative impact on GDP. Withdrawal of GSP+ would also signal concerns about Pakistan's commitment to human rights and governance, potentially affecting foreign investment and international relations. What’s more, Pakistan's textile sector would lose its competitive edge in the EU market, potentially losing market share to other exporting nations.

Therefore, Pakistan needs a multi-pronged approach to address the EU's concerns and secure continued GSP+ status. First it needs to focus on diplomatic engagement or proactive and transparent dialogue with the EU to understand specific concerns and demonstrate progress on reforms. It als needs to take concrete actions, tangible improvements in human rights, labor rights, and governance, supported by legislative and administrative measures is the need of the hour. And close collaboration between government, industry, and civil society is needed to address the challenges and ensure compliance with international standards.

The future of Pakistan's textile sector is inextricably linked to its GSP+ status. A concerted effort to address the EU's concerns is crucial to safeguard this vital sector and ensure its continued growth and contribution to the national economy. Failure to do so could have significant and lasting consequences.