KARACHI — Pakistan’s vital textile exporters are facing a precarious outlook, with industry leaders warning that rising domestic production costs and preferential trade access for regional rivals could severely erode their competitive edge in key European markets. The warning comes as the European Union moves to finalize a landmark free trade agreement with India, which threatens to dilute Pakistan’s long-standing tariff advantages under the EU’s Generalized Scheme of Preferences Plus (GSP+).
According to industry details, India and the EU concluded trade negotiations in January, with Indian officials projecting that the agreement could come into force as early as early 2027. This shift is expected to significantly alter the competitive landscape for Pakistan, which has heavily relied on GSP+ preferences to export duty-free to the EU bloc.
Abdul Hadi, President of the SITE Association of Industry (SAI), noted that while Pakistan’s textile and apparel exports showed a modest 5.26 percent year-on-year increase to $5.026 billion in the first quarter of the current fiscal year, this growth remains highly vulnerable. “Rising production costs and intensifying competition from regional exporters could easily undermine this fragile growth,” Hadi stated.
As the country’s largest export sector, generating approximately 60 percent of national export earnings and supporting millions of jobs, the textile industry’s health is critical to Pakistan’s economic stability. In the fiscal year ending June 2026, textile and apparel exports reached roughly $18 billion, but Hadi emphasized that the sector remains anchored to low-value products such as yarn, fabrics, and basic home textiles, which limit profit margins.
To secure a sustainable future, Hadi argued that Pakistan cannot indefinitely rely on existing trade preferences. He advocated for immediate government intervention to lower operational costs, enhance industrial efficiency, and boost product quality. Furthermore, he called for strategic investments in high-value segments, including technical textiles and branded apparel, alongside the adoption of modern manufacturing technologies.
Compounding these challenges is a decline in domestic cotton production, which has forced manufacturers to rely increasingly on expensive imported raw materials. Hadi urged the government to prioritize agricultural reforms, improve local cotton yields, and foster stronger coordination between agricultural and industrial sectors to ensure a reliable, cost-effective supply chain for the nation’s manufacturing base.