Recent WTO and UNCTAD updates show that trade patterns remain resilient but increasingly unstable: trade growth is being influenced by tariff changes, geo-economic risk and the expansion of trade in AI-enabling products, while policy uncertainty continues to disrupt supply chains and investment decisions.
At the same time, the WTO’s March 2026 report projects that global merchandise trade growth will slow from 4.6 per cent in 2025 to 1.9 per cent in 2026. Despite this projected slowdown, AI-enabled goods accounted for 42 per cent of global trade growth in 2025, highlighting the rapidly evolving nature of the global trading environment.
Pakistan has long depended on a narrow export base, especially textiles and apparel, while its broader economy is still stabilising; the World Bank reported 3.0 per cent growth in fiscal year 2025, up from 2.6 per cent the year before. That recovery gives policymakers a window to push export-led growth rather than rely only on domestic demand.
One of the clearest opportunities lies in export diversification. Pakistan’s trade performance remains closely tied to a few major markets and products. According to a World Bank report, Pakistan’s exports of goods and services declined from approximately 16 per cent of GDP in the 1990s to 10 per cent in 2024, highlighting the urgency of export diversification. The changing global economy is rewarding countries that can supply goods across multiple sectors rather than a single low-value segment. This means moving beyond basic textiles towards higher-value apparel, technical textiles, agro-processing, light engineering, pharmaceuticals and digitally delivered services. IMF research on supply-chain diversification suggests that spreading trade exposure across products and partners can improve resilience when shocks are frequent, even if it entails short-term adjustment costs.
As firms increasingly seek shorter, safer and more reliable supply chains, Pakistan can benefit by upgrading its ports, digitising customs procedures, improving transport connectivity and simplifying trade regulations. At the same time, the expansion of services and digital trade opens new possibilities through improved broadband connectivity and growth in fintech, software, and business services, enabling Pakistan to generate export earnings with less dependence on physical shipping.
The European market remains one of Pakistan’s most important export destinations. According to the European Commission, more than 85 per cent of Pakistan’s exports to the European Union enter duty- and quota-free under the GSP+ scheme. In 2025, the EU was Pakistan’s second-largest trading partner, representing 14.1 per cent of the country’s total trade. Bilateral trade in goods reached €12.2 billion in 2025, while services trade added €2.5 billion in 2024. Pakistan has benefited from GSP+ since 2014 and remains the scheme’s largest beneficiary, recording €7.5 billion in GSP+-eligible exports and approximately €732 million in tariff exemptions in 2024.
Under the current framework, Pakistan enjoys preferential market access through 2027, particularly for textiles and apparel. However, this access also comes with responsibilities. Pakistan must continue to comply with international conventions on human rights, labour standards, environmental protection, and governance. Therefore, the long-term sustainability of Pakistan’s export performance under GSP+ depends not only on trade competitiveness but also on consistent policy implementation and institutional reforms aligned with EU requirements. Stronger compliance would help Pakistan retain these preferences.
According to the EU’s GSP+ assessment for 2023–2025, Pakistan faced compliance problems and regressed in several areas, particularly human rights, labour rights and rule of law. The report highlights enforced disappearances, extrajudicial killings, restrictions on media and freedom of expression, misuse of blasphemy and cybercrime laws, weak judicial independence, discrimination against minorities and limited accountability for human-rights violations. Forced and bonded labour also remain widespread, while trade unions, collective bargaining and labour-law enforcement remain weak. Improvements have been recorded in climate reporting, hazardous-waste regulation, drug control, and anti-corruption measures. However, implementation remains inadequate. The scale of these challenges is reflected in the EU’s findings that approximately 26 million children – 38 per cent of Pakistan’s school-age population remain out of school, an estimated three million people were living in debt bondage in 2023 and fewer than 600 labour inspectors were responsible for protecting a labour force of approximately 70 million people.
Pakistan now stands at a critical crossroads. GSP+ preferences and changing global supply chains provide an important opportunity to expand exports, attract investment and move beyond dependence on traditional textiles. However, these gains cannot be taken for granted. Pakistan must translate legislative progress into effective implementation, address its gaps in the protection of human and labour rights, and strengthen governance while improving energy reliability, logistics and trade facilitation.
© 2026 SDPI. All Rights Reserved Design & Developed by NKMIS WEB Unit
