Pakistan

Since January 2014, Pakistan has GSP+ status and can benefit from preferential access to the European market. In compliance with the GSP regulation, Pakistan has ratified all 27 core international conventions on human rights, labour standards, environmental protection, and good governance. With a per-capita income of $1,530 (2019), Pakistan is considered a lower-middle income economy. Total EU imports from Pakistan amounted to €7.3 billion in 2019, of which €6.3 billion are imported benefiting from GSP+ tariffs. This makes Pakistan the largest beneficiary among all GSP+ beneficiary countries.

What is GSP+?

The GSP+ is a special incentive arrangement for Sustainable Development and Good Governance that supports vulnerable developing countries. Next to fulfilling the eligibility requirements of the General GSP, GSP+ countries are required to ratify 27 international conventions on human rights, labour rights, environmental protection and climate change, and good governance. In order to ensure effective implementation of the conventions as well as compliance with reporting obligations, the EU engages in monitoring activities with the GSP+ countries. GSP+ beneficiaries can benefit from complete duty suspensions for products across approximately 66% of all EU tariff lines.

At a glance: GSP+ beneficiaries' preferential imports to the EU

group

212.2 million

Population

account_balance
Federal Parliamentary Republic

Government

trending_up

3.3%

GDP Growth

equalizer

6.7%

Inflation

money

$ 278.22 bn

GDP

Facts about Pakistan's economy

Natural Gas Reserves

Pakistan has considerable shale gas reserves, which have not yet been exploited due to difficult terrain and environmental constraints. Despite the reserves, Pakistan's overall production of natural gas has declined in recent years.

Export Products

Pakistan's most important export products are trousers, linen, t-shirts and pullovers made from cotton but also medical instruments and appliances. Rice is the main agricultural product for export.

Trade Partners

The EU together with China, the UAE and the US are Pakistan's most important trading partners. Most imports originate from China and the UAE with the EU ranking third.

Economic Structure

Services account for approximately 57% of the GDP, followed by agriculture with a share of 24%. Important agricultural products are cotton, wheat, rice, sugarcane, and different sorts of fruits. The industry sector, dominated by textiles and apparel as well as food processing, contributes roughly 20% to Pakistan's GDP.

Usage Of GSP+ Preferences

About 87% of overall EU imports from Pakistan are imported using GSP+ preferential tariffs. The preference utilisation rate, which represents the ratio of preferential imports to GSP+ eligible imports, currently stands at 97%

Trade with the EU

Total trade between the EU and Pakistan summed up to € 10,763 million in 2019. The EU is Pakistan's second most important trading partner, behind China, with a share of 15%. 28% of Pakistan's exports go to the European market, making the EU the most important export destination for products from Pakistan.

Pakistan and the EU

Imports from Pakistan by product section

Imports from Pakistan over time (in € m)

PAKISTAN AND THE EU’s GSP

Economic Impact

Though it can still be considered vulnerable, Pakistan's economy slowly approaches the vulnerability threshold as defined under the GSP+. At the moment, Pakistan is the least vulnerable among all GSP+ beneficiary countries. In 2018, Pakistan's vulnerability score was 6.3% with the threshold currently standing at 7.4%. On the other hand, the diversification of the economy remains limited and concentrated on a small bandwidth of products. Pakistan's diversification score stood at 96.4% in 2018 with the minimum threshold currently standing at 75%.

89%

A very large share of Pakistan's exports to the EU is eligible for tariff reductions under the GSP. In fact, Pakistan is the GSP+ country with the largest share of eligible imports.

97%

With 97%, Pakistan makes considerable use of the preferential access to the European market and has the highest preference utilisation rate among all GSP+ beneficiaries.

Preference utilisation and export diversification

Pakistan's imports to the EU

Preference Utilisation vs. total eligible imports

Pakistan's preference utilisation rate is consistently among the highest rates of all GSP+ beneficiary countries over the regarded period. The strong increase of about 28 percentage points between 2013-14 can be explained by the additional preferences granted to Pakistan after its transition to GSP+ status on 1st January 2014. The transition was also significant regarding the subsequent increase in imports, which grew by about 16% between 2014 and 2016. Overall imports as well as preferential imports continued to increase between 2016 and 2018. The preference utilisation rate in the three dominant import sections, textiles, apparel, and leather articles, has been consistently well above 90% between 2016 and 2018.

Five largest product sections under GSP+

The utilisation of preferential tariffs remains highly concentrated on apparel and clothing. The sector makes up more than 70% of all preferential imports. Silk, wool and other fibres and fabrics account for another 13% of preferential imports. Between 2016 and 2018, some product sections saw significant increases in imports from Pakistan, including food and beverages, tobacco, and footwear. In addition, the machinery sector currently only makes use of the reduced duties for about 27% of imports. This opens the opportunity to further diversify product sections and to shift to sectors with higher value-added products.

SUSTAINABLE DEVELOPMENT AND MONITORING PRIORITIES

Pakistan ratified 27 core conventions on human rights, labour rights, environmental protection, and good governance.The most recent monitoring results over the period 2018-2019 showed that Pakistan maintained ratification of all relevant conventions. Despite an improvement in overall compliance with reporting obligations in recent years, Pakistan has two outstanding reports on human rights conventions that were due the beginning of this year. Additionally, a number of reports on environmental conventions, including on the Cartagena Protocol and the Stockholm Convention, are overdue.

Monitoring priorities during the reporting period 2018-2019

Prevention of Torture

Freedom of expression

Death penalty

Domestic violence

Child labour

Labour inspections

Freedom of association

Anti-money-laundering

Interfaith dialogue policy

Establishment of a Truth and Reconciliation Committee for victims of enforced disappearances

For the reporting period 2018-2019, the EU has identified ten focus areas for its monitoring activities. Developments in Pakistan provide a mixed picture. In some areas, the government has taken important steps to introduce legislation to support the effective implementation of the conventions. Still more effort and a stronger institutional set up is needed to translate the conventions in national law and ensure their application.

1. HUMAN RIGHTS

Pakistan has ratified all seven fundamental UN human rights conventions which are included in the GSP+ regulation and has additionally ratified the UN Convention on the Rights of People with Disabilities which is not required under the GSP+. During the reporting period, Pakistan has passed a number of important laws which support the effective implementation of core human rights treaties. This includes inter alia legislation that strengthens the rights of transgender persons, prevents domestic violence, restricts child marriage and sexual assault against children. Additionally, there is a positive trend on the promotion of religious freedom. Despite the government drafted a Journalist Welfare and Protection Bill, the overall situation of press freedom shows a negative trend. This also applies to the situation of civil society organisations and human rights defenders. The registration of international NGOs remains opaque and cases of intimidation, abduction and killing of human rights defenders and journalists are often not properly investigated or prosecuted which poses a serious threat to the right to freedom of expression. A review process has been started to align the national definition of "most serious crimes", for which a death sentence can be imposed, with the provisions under the International Covenant on Civil and Political Rights (ICCPR). Similar efforts are undertaken to legally define and criminalise torture as required under the Convention Against Torture (CAT). Gender equality is another important area where additional progress is required. Women still often face domestic violence, social and economic restrictions which lead to systematic inequality. A positive development is the increasing number of women participating in elections for National Assembly general seats.

Ratified

2. LABOUR RIGHTS

Pakistan has ratified all eight ILO conventions required by GSP+ and has additionally ratified the Labour Inspection Convention and the Tripartite Consultation Convention which are not officially covered by the GSP+ regulation. Nonetheless, the effective implementation of these conventions is hampered by a very weak labour inspectorate system. A Child Labour Survey has been initiated, while until now no steps have been taken to introduce a comprehensive child labour law. Likewise, the enforcement of existing regulations remains insufficient with regards to Child Labour. Furthermore, the rights and provisions under the ILO Convention on freedom of association and collective bargaining are being systematically disregarded. Forced labour remains a major problem although it is legally prohibited. Gender inequality also persists in the labour markets and manifests itself in unequal payment, overall lower participation of women in the labour force and their limited presence in high level occupations.

Ratified

3. ENVIRONMENTAL PROTECTION

Pakistan has ratified all relevant conventions covered under GSP+ and has stepped up its commitment to ensure effective implementation. Likewise, the overall level of awareness among civil society organisations about the provisions under the environmental protection conventions has increased. Addressing climate change is a focus area of the government as the country is highly vulnerable to the impacts of climate change. The country aims to reduce its emissions by 20% until 2030. Pakistan continues to import hazardous waste and often fails to test scraps for contaminants before they are being reused in manufacturing which violates existing national regulations. The government has taken steps to introduce Hazardous Waste Management Policy. In order to address illegal trade of wildlife, the authorities cooperate with a number of stakeholders (e.g. WWF and local communities) and takes part in different regional initiatives like the South Asia Wildlife Enforcement Network.

Ratified

4. GOOD GOVERNANCE

Capacities have been enhanced to effectively address corruption. Some national authorities, like the National Accountability Bureau, will still need more autonomy and confidence to continue to work effectively. Furthermore, the bureau is encouraged to take a more universal approach on accountability as it is currently criticized for its imbalance towards opposition parties. Furthermore, Pakistan remains on the route of drug traffickers, despite significant seizures and stricter measures. The government introduced national programmes to address the demand side and tackle drug abuse.

Ratified

EU-Pakistan Bilateral Development Assistance

€ 603 million

The bilateral development cooperation with Pakistan amounts to €603 million for the period 2014-2020, making it one of the largest programmes in Asia. Special priority areas include the support of rural development, to which more than half of the funds are allocated, education and vocational training as well as good governance, rule of law and human rights.

Opportunities in Pakistan

  • One of the most populous countries in the world, comparatively young population and labour force with a generally good command of the English language
  • Ongoing expansion and modernisation of many industrial sectors
  • The IT sector is growing although its potential is currently still hampered by lacking infrastructure
  • Untapped potential in exploiting Pakistan's reserves of coal, copper, salt, gold, other precious metals
  • Large domestic market and growing middle-class

Most recent events

Date Event
2019‑11‑15 10th session of the European Union-Pakistan Joint Commission was held in Brussels

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