Pakistan exports to western, northern Europe decline despite GSP+ as US-Iran tensions disrupt trade

By Staff Reporter

ISLAMABAD: Pakistan’s shipments to its largest European markets posted negative growth in the first nine months of the fiscal year, even as the country continued to enjoy duty-free access under the European Union’s Generalized Scheme of Preferences Plus program.

Exports to European countries rose a scant 0.94% to $6.86 billion in the nine months through March, from $6.79 billion a year earlier, according to data compiled by the State Bank of Pakistan. The modest headline gain masks a sharper slowdown in the bloc’s western and northern markets, which together account for the bulk of Pakistan’s European sales and where shipments declined outright.

The weakness comes as a shifting global trade landscape adds pressure on Pakistani manufacturers already grappling with higher input costs at home. The US-Iran conflict has disrupted shipping routes through the Middle East, raising freight expenses and delivery times for goods bound for Europe. At the same time, the EU extended preferential market access to India earlier this year, sharpening competition in textiles and other labor-intensive sectors where Pakistan has long held an edge.

The EU’s ambassador to Pakistan, Raimundas Karoblis, underscored the fragility of the arrangement earlier this month. In remarks that signaled a tougher stance from Brussels, Karoblis warned that GSP+ status — which grants duty-free entry to most European markets — is neither guaranteed nor automatic and would depend on Islamabad’s progress on human rights and governance reforms.

The slowdown was concentrated in the markets that matter most to Pakistani exporters. Shipments to northern Europe slipped 0.85% to $557.31 million. Western Europe, which includes Germany, the Netherlands, France and Belgium and represents Pakistan’s single largest European destination, fell 3.14% to $3.30 billion. Country-level figures illustrate the breadth of the pullback:Germany, the top buyer in the region, declined 2.97% to $1.24 billion. The Netherlands dropped 1.78% to $1.10 billion. France eased 2.62% to $411.89 million. Belgium retreated 4.73% to $402.86 million.

Southern and eastern Europe provided some offset. Exports to southern Europe rose 6.47% to $2.43 billion, while eastern Europe advanced 5.06% to $566.92 million. Spain led the gains, climbing 7.44% to $1.18 billion; Italy increased 4.26% to $880.13 million. Greece was the outlier, falling 8.44% to $98.16 million. The United Kingdom, once Pakistan’s biggest single European market before Brexit, showed little change. Exports edged down 0.23% to $1.62 billion, essentially flat with the prior year.

The current softness marks a reversal from the previous fiscal year. In FY25, Pakistan’s exports to the EU climbed 7.44% to $8.86 billion from $8.24 billion. That followed a 3.12% decline in FY24, when shipments totaled $8.24 billion despite the GSP+ umbrella. The UK posted stronger growth last year, rising 7.19% to $2.16 billion. For Pakistani exporters, the combination of logistical disruptions, elevated domestic costs and fresh competition is creating a dual squeeze. Maintaining GSP+ compliance requires steady advances on labor rights and environmental standards, while rivals with newly expanded access chip away at market share. The Middle East conflict is expected to compound the challenge by pushing up energy prices across Europe, where consumer spending is already constrained by the lingering effects of the Ukraine war.

Trade analysts caution that the pressure on European purchasing power could further erode demand for imported goods, including textiles, apparel and leather products that dominate Pakistan’s export basket. Rising freight rates from rerouted shipping have already squeezed margins, and any sustained increase in energy costs risks tipping Europe’s fragile recovery into slower consumption.