The report titled “A Review of the Proposed Pakistan-Thailand Free Trade Agreement” is part of the Pakistan Business Council’s Market Access Series 2025-2026. The report analyzes trade patterns, derives lessons from existing trade agreements with the ASEAN region and the ASEAN–India Trade Agreement, and suggests a way forward for the proposed FTA.
Thailand ranks as Pakistan’s 6th largest export partner and 4th largest import partner. In terms of total trade value, Thailand is the 4th biggest trading partner for Pakistan among ASEAN countries. In 2024, Pakistan’s exports to Thailand amounted to $251.28 million and imports were around $845.44 million. Resulting in a deficit for Pakistan of -$594.16 million. Seafood dominated exports with $86.23 million (34.32% share). Pakistan ranked as 14th largest seafood supplier to Thailand (2.5% share).
Figure 1: Pakistan’s Trade with ASEAN in 2024
Pakistan has consistently run a trade deficit with Thailand, at least from 2015 to 2024. Exports to Thailand grew at 8.52% annually, while imports decreased slightly by 0.10%. Despite export growth, the deficit remained as imports were much higher. The deficit peaked in 2018 at nearly $1,500 million.
Figure 2: Pakistan – Thailand Trade Balance from 2015-2024
Pakistan has an FTA with Malaysia (MPCEPA – 2008) and a PTA with Indonesia (IP-PTA – 2013). In both cases, imports surged while exports showed limited growth, leading to persistent trade deficits. Under the Malaysia FTA, Pakistan received concessions on 10,593 lines and granted concessions on 6,803 lines, however, exports like rice face a 40% tariff, possibly to protect Malaysia’s domestic agriculture. However, for India the tariff is 20% due to India’s FTA with ASEAN. The Indonesia PTA also led to higher imports, with a minor improvement in exports after 2023. Findings show that Pakistan’s concessions often favour imports over exports, reducing revenue and hurting local industry.
Thailand-India trade grew after the 2004 Early Harvest Scheme and the AIFTA agreement, but India’s trade deficit with Thailand has steadily widened because Thailand exports higher-value products while India mostly sends low-value goods. India also struggles to benefit fully due to non-tariff barriers, weak rules of origin, low utilization of the FTA, and competitiveness challenges at home. Thailand’s investment presence is much stronger in India than in Pakistan, but the irregular pattern of these investments shows that long-term capital depends heavily on clear rules, good infrastructure, and economic stability. For Pakistan, the key takeaway is to boost export competitiveness, tighten rules of origin, tackle NTMs, and negotiate more balanced trade agreements.
Figure 3: India – Thailand Trade Balance
Overlapping Commodity Matrix: The products that Pakistan exports globally are similar to those that Thailand already produces and exports. Thailand has greater expertise in these sectors, which leaves very little gap or complementarity between the two economies.
Thailand’s ASEAN Relations and RCEP Membership: Thailand prioritizes trade within ASEAN and the RCEP framework, which includes major economies like Australia, China, Japan, South Korea, and New Zealand. Its geographical proximity and zero-tariff agreements with these countries make Pakistan a lower priority market for Thailand.
Limited Export Strength and Low Value-Added Goods: Pakistan’s export base is narrow, focused mainly on fisheries, textiles, rice, and fruits. Most of these products are low-value or intermediate goods and often do not meet Thai quality standards. Thailand already imports similar items from nearby countries like Vietnam and China, leaving Pakistan with little competitive edge.
Lack of Government Effort and Engagement: Pakistan has not actively engaged with the Thai government or business sector. The focus has largely remained on markets in the Middle East, Europe, North America and China. As a result, Thai businesses have limited awareness and understanding of Pakistan’s market potential. This lack of formal interaction and promotion has restricted trade opportunities.
Poor Preparation for Trade Negotiations: Pakistan’s trade agreements often lack preparation and result in unequal concessions, as seen in FTAs with Malaysia and Indonesia. A similar approach with Thailand could lead to a surge in Thai imports without a proportional rise in Pakistan’s exports.
Lessons from Existing Trade Agreements: Experiences with China, Malaysia, and Indonesia show that FTAs can widen trade deficits when not properly negotiated. Imports rise sharply while exports stagnate, hurting domestic industries. A similar case could be with Thailand, as it is a highly advanced economy with expertise in many areas and high value-added goods that are already being imported by Pakistan.
Thailand’s Efficiency and Competitiveness: Thailand enjoys strong foreign investment, especially from Japan, and has high levels of automation and, lower energy costs. Pakistan cannot match Thailand’s efficiency, scale, or competitiveness.
Issues with Pakistan’s Industrial Base: Pakistan’s industries face high energy costs, poor infrastructure, and rising input costs. The textile sector, which accounts for half of exports, faces tough competition from Bangladesh, India, and Vietnam. The leather industry is also declining because artificial leather has replaced natural leather, reducing demand.
Differences in Market Demand: Consumer preferences differ between the two countries. For example, Thailand’s demand for sticky and jasmine rice does not align with Pakistan’s export of long-grain basmati, creating limited market compatibility.
Illegal Trade and Weak Regulation: Illegal exports and poor regulation result in heavy revenue losses, it is estimated that in the case of Pakistan, around $5 billion annually is lost especially in the gemstone sector. Courier services like DHL and FedEx avoid gemstone shipments due to legal uncertainties, forcing traders to rely on informal channels.
Stringent Thai Import Requirements: Thailand’s strict food safety and phytosanitary standards, such as HACCP certification for seafood, make it difficult for Pakistani exporters to qualify. The approval process is lengthy and limits exporters to specific importers, and reduces market access.
Threat to Local Industry: An FTA could harm domestic industries, as cheaper Thai machinery, engineering goods, auto parts and other manufactured goods could potentially enter Pakistan easily, making it difficult for local producers to compete.
Visa Issues: Thailand’s stricter visa policy for Pakistanis has made business travel difficult. The online visa system is time-consuming, limiting long-term or multiple-entry visas. This restricts business interactions and hampers trade and investment opportunities.
Textiles: Pakistan’s textile exports to Thailand remain minimal despite its strong global standing. Thailand’s growing imports of apparel offer Pakistan opportunities to supply niche fabrics, value-added garments, and used clothing. Aligning with sustainability and compliance standards can help Pakistan tap into Thailand’s expanding tourism and retail sectors.
Gems and Minerals: Pakistan has vast reserves of gemstones and minerals, but much of the trade with Thailand is informal. Thailand’s expertise in gem cutting, polishing, and design can support Pakistan through joint ventures, training, and technology transfer. Improved infrastructure, certification, and formalized trade mechanisms can boost exports and attract investment.
Tourism: Thailand’s tourism earns around $50–60 billion annually, supported by strong infrastructure and management. Pakistan has high potential for tourism but lacks facilities, promotion, and training. Pakistan can also export medicines, surgical instruments, and medical textiles to support Thailand’s growing health tourism.
Food and Canning: Pakistan produces high-quality fruits like mangoes, while Thailand has advanced canning and food-processing industries. Joint ventures can help Pakistan reduce waste, improve yields, and produce value-added items like freeze-dried fruits. Adopting Thailand’s technology for drying mangoes, bananas, and peaches can boost exports.
Seafood and Meat: Pakistan’s seafood exports, particularly shrimp and fish, are increasing. Thailand already offers aquaculture consultancy, but deeper joint ventures could help Pakistan modernize processing, add value, and strengthen export competitiveness.
Automobile and Machinery: Thailand’s established automobile industry offers Pakistan opportunities to gain technical assistance and parts manufacturing knowledge.
Investments: Pakistan can attract Thai investments in fisheries, canned food, dry fruits, and cosmetics. With its large domestic market, Pakistan offers opportunities for local production, job creation, and mutual industrial growth.
Petrochemicals, Fertilizers, and Rubber: Thailand’s petrochemical sector produces materials like ethylene and propylene that Pakistan lacks. Thailand can fulfill industrial demand at competitive prices. Thailand’s fertilizer industry can support Pakistan’s agriculture through technology transfer, while its strong rubber production sector offers scope for expanding trade.
A full-scale Free Trade Agreement (FTA) between Pakistan and Thailand is not advisable at this stage as it could increase Pakistan’s trade deficit and harm local industries. While reduced duties might make essential imports cheaper, the overall impact would likely be negative because Thai products, especially automobiles, spare parts, and processed foods, would become more competitive than local ones.
Both countries export similar goods such as rice, seafood, textiles, fruits, and vegetables, which limits trade opportunities. Thailand’s larger industrial capacity, modern technology, and production efficiency make it difficult for Pakistan to compete. Pakistan’s exports are mostly low value-added and often fail to meet international quality standards.
Trade agreements with countries like China and Malaysia have shown that such agreements tend to increase imports while exports remain stagnant, widening the trade gap and hurting local industries. Therefore, instead of a full FTA, Pakistan should consider a cautious approach by negotiating limited concessions or preferential trade arrangements for essential goods. This would help reduce costs while protecting domestic manufacturers. A selective approach is therefore recommended which would not only open the Thai market for some of Pakistan’s major global exports such as textiles, but also allow Pakistani exporters to adapt their existing products and develop new offerings for the Thai market.
The PBC is a private sector not-for-profit advocacy platform set-up in 2005 by 14 (now 100+) of Pakistan’s largest businesses. PBC’s research-based advocacy supports measures which improve Pakistani industry’s regional and global competitiveness. More information about the PBC, its members, objectives and activities can be found on its website: www.pbc.org.pk
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