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India–EU Trade Deal Grants Zero-Duty Access to Europe, Reshaping Regional Export Competition

The agreement is expected to expand India’s access to European markets while raising challenges for Pakistan’s textile and apparel exports

By Saad Published a day ago 4 min read



Introduction

India and the European Union have concluded a long-negotiated free trade agreement that will give Indian exporters zero-duty access to European markets across a wide range of goods. The deal marks a major step in trade relations between the two sides and is expected to influence economic patterns beyond India and Europe. One of the countries most affected by the agreement is Pakistan, whose export sector, particularly textiles and apparel, competes directly with India in the European Union.

The agreement is being described by policymakers as historic in scale and scope. While India stands to gain expanded market access, the deal is also expected to alter competitive dynamics in South Asia, especially for export-oriented economies that rely heavily on European demand.


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Overview of the India–EU Free Trade Agreement

The India–EU free trade agreement aims to remove or reduce tariffs on thousands of products traded between the two sides. Under the terms outlined by officials, Indian exporters will benefit from zero or near-zero duties on a wide range of industrial and manufactured goods entering the European Union.

The agreement also includes provisions related to services, investment protection, and regulatory cooperation. However, the most immediate impact is expected in goods trade, where tariff elimination can significantly change pricing and competitiveness.

Negotiations for the deal stretched over several years, with both sides addressing concerns related to market access, labor standards, and environmental commitments.


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What Zero-Duty Access Means for India

Zero-duty access allows Indian products to enter the European market without paying customs tariffs. This can lower costs for importers and consumers while improving margins for exporters.

Sectors expected to benefit include textiles, garments, pharmaceuticals, engineering goods, and processed foods. For textile and apparel exporters, even small tariff reductions can have a large impact due to tight margins and high competition.

Indian officials have highlighted the agreement as a tool to boost exports, create jobs, and integrate the country more deeply into global supply chains.


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Europe’s Role as a Key Market

The European Union is one of the world’s largest consumer markets and a major destination for South Asian exports. Apparel, home textiles, and value-added garments from the region are widely sold across European countries.

European buyers often source from multiple countries to balance cost, quality, and supply reliability. Tariff preferences play a significant role in these sourcing decisions.

With India gaining zero-duty access, European importers may reassess their supplier mix, particularly in sectors where India and Pakistan offer similar products.


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Pakistan’s Dependence on Textile Exports

Pakistan’s economy relies heavily on textile and apparel exports, which account for a significant share of total export earnings. The European Union is one of Pakistan’s largest export destinations, especially under preferential trade schemes that reduce tariffs.

Pakistani exporters compete primarily on cost, scale, and product range. Any shift in tariff structures that favors competing countries can affect order volumes and pricing power.

Industry representatives in Pakistan have expressed concern that India’s new access to Europe could place additional pressure on an already challenging export environment.


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Competitive Impact on Pakistan’s Textile Sector

The removal of duties on Indian exports could make Indian products more price-competitive in the European market. This is particularly relevant for basic garments and home textiles, where buyers are sensitive to small cost differences.

Pakistani exporters may face tighter margins as European buyers compare offers from India and Pakistan under new tariff conditions. Some exporters fear losing market share unless productivity and efficiency improve.

While Pakistan still benefits from existing trade preferences, the relative advantage could narrow if India’s tariff-free access covers similar product categories.


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Industry Response in Pakistan

Textile industry groups in Pakistan are calling for policy support to help exporters remain competitive. Suggested measures include energy cost reductions, tax incentives, and investment in value-added production.

Some exporters argue that Pakistan needs to move up the value chain by focusing on higher-end garments, branding, and sustainable production practices. These areas could help differentiate Pakistani products beyond price alone.

Others emphasize the need for trade diplomacy to secure or expand preferential access to key markets.


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Regional Trade Dynamics in South Asia

The India–EU agreement is likely to influence broader trade dynamics in South Asia. As India strengthens its position in European markets, neighboring countries may need to adapt their export strategies.

Competition among South Asian exporters has historically been intense, particularly in textiles. Trade agreements can shift this balance by altering cost structures and market access.

Analysts note that the deal may encourage other regional economies to pursue similar agreements or renegotiate existing trade terms.


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EU Considerations and Standards

The European Union has emphasized that the agreement with India includes commitments on labor rights, environmental protection, and regulatory standards. Compliance with these requirements will be important for exporters seeking long-term access.

European buyers increasingly prioritize sustainability and traceability in their supply chains. Indian exporters benefiting from zero-duty access will still need to meet these expectations.

For Pakistan, maintaining compliance with EU standards remains essential, regardless of changes in tariff structures.


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Potential Long-Term Effects

In the long term, the India–EU free trade agreement could reshape supply chains and investment flows. European companies may increase sourcing from India or invest directly in Indian manufacturing to take advantage of tariff benefits.

For Pakistan, the challenge will be to adapt through productivity improvements, diversification, and market expansion. While the immediate impact may be felt in textiles, other sectors could also face indirect effects.

The agreement highlights how trade policy decisions in one country can have ripple effects across an entire region.


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Policy Choices Ahead for Pakistan

Pakistan’s policymakers face decisions on how to respond to the changing trade landscape. Options include pursuing new trade agreements, strengthening existing ones, and supporting export-oriented industries.

Investments in technology, skills development, and infrastructure could help improve competitiveness. At the same time, maintaining macroeconomic stability remains critical for exporters facing global uncertainty.

Trade experts caution that relying solely on tariff preferences is not a sustainable long-term strategy.


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Conclusion

The India–EU free trade agreement granting zero-duty access to European markets marks a significant development in global trade. For India, it offers expanded opportunities and stronger integration with Europe. For Pakistan, it introduces new competitive pressures, particularly in the textile and apparel sector.

How Pakistan responds will depend on policy choices, industry adaptation, and engagement with global markets. The agreement serves as a reminder that trade deals can reshape regional economies, creating both opportunities and challenges beyond the countries directly involved.

As the deal moves toward implementation, its full impact on South Asian exports and European supply chains will become clearer in the years ahead.

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About the Creator

Saad

I’m Saad. I’m a passionate writer who loves exploring trending news topics, sharing insights, and keeping readers updated on what’s happening around the world.

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