Pakistan’s Trade with the EU & its Member States

This study by the Pakistan Business Council (PBC) titled “Pakistan’s Trade with the EU & its Member States” is part of the PBC’s Market Access Series 2021-22.  The report graphically depicts Pakistan’s trade with the European Union (EU) as a single entity and bilateral trade with the 27 Member states of the EU. In addition, the potential for trade between Pakistan and the EU and for Pakistan and the 27 member states of the EU is also shown.

The EU combined is one of the world’s largest economies. In 2020, the EU recorded the second-highest export value of €1,871 billion and the third-largest imports of €1,345 billion. The Gross Domestic Product (GDP) of the EU was € 13,381 billion in 2020. The top 10 economies of the EU based on GDP in 2020 are shown in the table below:

Pakistan was initially granted preferential access to the EU markets under the Generalized System of Preferences (GSP) scheme which in 2014 was upgraded to a GSP+ status. Pakistan’s GSP+ status grants full removal of tariffs on a majority of EU tariff lines. Pakistan’s current GSP+ status ends in December 2023. For continuation of its GSP+ status beyond 2023, Pakistan will need to make a fresh application seeking continuation of its GSP+ status. The EU recently announced that for countries to qualify for GSP+ status for the 2024 –34 period, they must commit to implement 32 EU conventions as opposed to the current 27 conventions.

With exports amounting to €5.5 billion in 2020, the EU was Pakistan’s largest export destination. Similarly, with imports amounting to €3.6 billion in 2020, the EU was Pakistan’s third largest import source. As can be seen, Pakistan’s exports to the EU have increased since 2016 primarily due to GSP+ with a slight dip in 2020.  Imports from the EU have faced similar fluctuations ending with a trade surplus in Pakistan’s favor of €1.9 billion in 2020.

The figure below shows bilateral trade between the EU and Pakistan in the last 5 years.

Pakistan’s exports to the EU are dominated by textiles and clothing, accounting for 75.2% of Pakistan’s total exports to the EU in 2020. Around a quarter of these imports are bed linen, table linen and toilet and kitchen linen. Seventeen of the top 25 export products at HS-06 level are textiles and textiles articles. ‘Mens or boys trousers, bib and brace and shorts of cotton’ was Pakistan’s largest export to the EU in 2020. Top 25 products provided additional export potential of €5.4 billion in 2020. Rice (Broken rice and husked or brown rice) and textile articles (toilet linen, kitchen linen, floorcloths, dishcloths, bedlinen, blankets, household linen) provide major export potential worth €3 billion. Pakistani rice (semi milled or wholly milled) had an export potential of €1.2 billion in the EU market.

Pakistan’s imports from the EU are mainly comprised of machinery and transport equipment (33.5% in 2020) as well as chemicals (22.2% in 2020). Nine of the top 25 import products at HS-06 level are machinery and electrical equipment. ‘Waste and scrape of iron or steel’ was Pakistan’s largest import from the EU in 2020. Top 25 products provided additional import potential of €11.06 billion in 2020. Machinery, mechanical appliances & vehicles (telephones, semiconductor devices, data processing machines and motorcars) and palm oil provide import potential of €5.3 billion. Mobile telephones have an import potential of €1.7 billion.

The PBC is a private sector not-for-profit advocacy platform set up in 2005 by 14 (now 88) of Pakistan’s largest businesses including multinational. PBC’s research-based advocacy supports measures which improve the Pakistani industry’s regional and global competitiveness. More information about PBC, its members, objectives, and activities can be found on its website: www.pbc.org.pk