What is the 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 Standard 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
235,82 M
Population
Federal Parliamentary Republic
Government
4.70%
GDP Growth
23.60%
Inflation
$ 374,70 B
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 EU ranks second.
Economic Structure
Services account for approximately 52% of the GDP, followed by agriculture with a share of 22.3%. 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 nearly 20% to Pakistan's GDP.
Usage of GSP+ Preferences
About 85% 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 93.4%
Trade with the EU
Total trade between the EU and Pakistan summed up to € 14,857 million in 2022. The EU is Pakistan's second most important trading partner, behind China, with a share of approximately 12%. Almost 30% 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 (2022)
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 2019, Pakistan's vulnerability score was 6.7% 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 94.4% in 2019 with the minimum threshold currently standing at 75%.
91%
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 second-largest share of eligible imports.
93%
With 93%, Pakistan makes considerable use of the preferential access to the European market and has the highest preference utilisation rate among all GSP+ beneficiaries, alongside Uzbekistan.
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. In 2022 the utilisation rate is the lowest since 2014, but still solidly above 90%. The preference utilisation rate in the three dominant import sections, textiles, apparel, and leather articles, has been consistently well above 90% between 2016 and 2022.
The largest product sections under the 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 12% 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 utilisation rate for machinery sector has increased from 27% in 2020 to almost 100% in 2022. Similarly, import of cereals, grains and seeds increased by 45% since 2020, and the GSP utilisation rate is almost at 100%. This shows the country's efforts to diversify product sections. The opportunity remains to further diversify product sections and to shift to sectors with higher value-added products.
SUSTAINABLE DEVELOPMENT AND MONITORING PRIORITIES
During the monitoring cycle 2020-2022 the Islamic Republic of Pakistan (Pakistan) experienced unprecedented economic, political, and environmental challenges: the global impact of the COVID-19 pandemic, the energy and food crisis induced by the unprovoked and unjustified war of aggression of Russia against Ukraine as well as the unprecedented floods hit the economy and the Pakistani population hard. Despite the political turmoil with a change of government on federal level and strong tensions between government and opposition at federal and provincial level, Pakistan has undertaken important legislative steps in areas linked to its sustainable development in line with GSP+. It will be crucial for Pakistan to continue legislative reforms and to implement legislation so that they lead to tangible improvements for all Pakistanis. Pakistan is the largest exporter to the EU under the GSP+ trade scheme and the EU is Pakistan’s most important export destination. However, Pakistan relies significantly on textile and apparel for its exports. Export diversification would help Pakistan reduce its trade imbalances and would also increase its resilience to external economic pressures and shocks.
Monitoring priorities during the reporting period 2024-2025
Enforced disappearances
Torture prevention
Death penalty
Freedom of expression and belief and minority rights
Violence against women, transgender persons, and minorities
Right to information
Labour inspectorates
Freedom of association and the right to collective bargaining
Child and forced labour
Combatting climate change and environmental degradation
Fight against corruption
Drug control
Reporting
For the reporting period 2024-2025, the EU has focussed its monitoring activities on thirteen priority areas. The Government of Pakistan is clear on its commitment to maintain its GSP+ eligibility and during the monitoring period it has engaged openly with the EU at all levels. Political will needs to be coupled with more determined action for implementing reforms, in particular to better protect human and labour rights.
EU-Pakistan Bilateral Development Assistance
DG INTPA
Access all info about EU-Pakistan relations on the International Partnerships website: https://international-partnerships.ec.europa.eu/countries/pakistan_en
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