Why GSP+ cannot be taken for granted

Pakistan has been a beneficiary of the European Union’s Generalised Scheme of Preferences Plus, commonly known as GSP+, since 2014. Over the years, this preferential trade arrangement has become something we have gotten used to, or almost taken for granted. But as recent developments show, it is anything but. The European Commission released its latest assessment of Pakistan’s GSP+ compliance on 16 July this year, covering the period from 2023 to 2025. The report acknowledged that Pakistan has ratified the required international conventions and passed a number of important laws. However, it also noted that much of this progress has remained at the legislative level and has not yet translated into concrete changes on the ground. In simple plain words, the laws are there, but their enforcement needs to catch up. There were also areas where the Commission found limited forward movement. This matters because the rules of the game are changing. The current GSP framework is set to expire at the end of this year. A new regulation, EU Regulation 2026/1395, will take its place from 2027 and run through 2036. Pakistan, along with other current beneficiaries, has been carried into a transition window that runs until 31 December 2028 and continuation beyond that date is not automatic. Pakistan will need to reapply, and the reapplication will again require a detailed action plan with measurable targets and timelines. According to recent media reports, senior EU officials have made it clear that GSP+ preferences should not be treated as something guaranteed. At the same time, it has been reported that no formal determination regarding any suspension of Pakistan’s preferences has been made so far. This provides some room but not for complacency. The overall direction of the EU’s messaging suggests that implementation, not just ratification, will be the central benchmark going forward. Reports indicate that a strong emphasis is now being placed on visible, verifiable outcomes, particularly in areas related to governance, labour rights, and environmental commitments. So to understand the gravity of the situation let us consider what is at stake. In 2025-26, Pakistan’s exports to the EU stood at around USD8. 96 billion. The EU accounts for roughly 28 per cent of our total exports, and nearly 90 per cent of what Pakistan sends to the bloc is eligible for GSP+ preferences. Within this, textiles and clothing make up between 70 and 76 per cent of exports to Europe, with preference utilisation rates running above 95 per cent for apparel. In 2024, Pakistan received approximately €732 million in tariff exemptions. These numbers represent not just trade figures, but factory floors, supply chains, and livelihoods across the country. If preferential access were to be lost, the impact would be felt quickly. Products currently entering Europe duty-free, particularly garments, would face tariffs of around 12 per cent, which would make them less competitive almost overnight. There are also precedents worth noting: Sri Lanka previously lost its GSP+ preferences entirely, and Bolivia faced partial withdrawal. These are not hypothetical scenarios. What makes the situation more pressing is the competitive landscape. India concluded its Free Trade Agreement negotiations with the EU earlier this year, and once that deal comes into force, Indian textile and apparel exports will gain tariff-free access to the EU market without the kind of convention-based compliance requirements that GSP+ carries. On the other side, Bangladesh is set to graduate from least-developed-country status in November 2026, but EU transition rules will preserve its duty-free access until late 2029. Pakistan, therefore, finds itself in a difficult position: it must secure continued preferential access through a reapplication process, while its two main regional competitors are either locking in or retaining their own advantages through different pathways. Similarly, it is worth recognising what the export industry has done on its end. Pakistan’s leading textile manufacturers are among the most audited in the world. A number of factories have obtained LEED certifications, adopted water and energy efficiency measures, and invested in effluent treatment and recycling systems. Programmes like the Zero Discharge of Hazardous Chemicals, OEKO-TEX certifications, and the Better Cotton Initiative have been part of the sector’s practice for years. On the labour front, independent social audits such as amfori BSCI, Sedex SMETA, WRAP, and SA8000 are routinely carried out to meet the standards European buyers expect. Meeting these standards is not a matter of choice; it is a prerequisite for doing business with European brands. However, the broader compliance landscape, particularly the areas the EU assessment has focused on, falls outside the control of individual exporters. The industry can meet every factory-level standard and still face risks to its market access because of issues it cannot directly influence. This is the core tension: the sector that benefits most from GSP+ is also the one with the least ability to address some of the compliance concerns being raised at the state level. There is also the energy dimension, which intersects directly with this conversation. Pakistan’s industrial electricity rates remain among the highest in the region. The International Energy Agency’s 2025 report puts the industrial tariff at 13. 5 US cents per kilowatt-hour more than double India’s 6. 3 cents and nearly twice Vietnam’s 7. 3 cents burden that exporters, especially those on B-3 and B-4 industrial tariffs, continue to bear. When a regionally competitive energy tariff was briefly introduced, and industrial power came close to 9 cents, textile exports grew significantly. Likewise, with the EU’s Carbon Border Adjustment Mechanism entering its definitive phase, textiles are expected to be brought under its scope in the coming years. If exporters are unable to access affordable and cleaner energy sources, they may face the dual pressure of high domestic costs and emerging carbon-related charges in their export markets. This is a structural issue that needs attention. On the positive side, the legislative and ratification work that GSP+ requires is largely done. Pakistan has already ratified the five additional conventions that the new, stricter framework will require, bringing the total from 27 to 32. The Prime Minister has constituted a committee to steer the reapplication process, which is an encouraging step. But the window is short: the transition period ends in just over two years. What will matter most is how effectively the existing frameworks are implemented, and whether Pakistan can present a credible, well-structured plan when the time comes. Pakistan has benefited enormously from GSP+, and it has the foundation in terms of both trade infrastructure and legal frameworks to continue doing so. However, the next phase requires more than previous methods have delivered. It requires a coordinated effort, bringing together all relevant stakeholders, to ensure that the hard work of the past decade leads to visible results. The opportunity is there, but so is the urgency. And in a contest where India and Bangladesh are not standing still, neither can we afford to. Copyright Business Recorder, 2026

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