South Asia’s two other major textile exporters, Bangladesh and Pakistan, are growing increasingly anxious over the newly struck Free Trade Agreement (FTA) between the European Union and India.
Under the pact, Indian goods will gain broader, tariff-free entry into European markets — a development that has already rattled officials and exporters alike in both Islamabad and Dhaka.
Industry insiders in Pakistan and Bangladesh describe the EU-India accord as a potentially transformative shake-up for the continent’s textile trade, warning it could squeeze their firms out of a market that has long been their most important outlet. Europe remains the single largest export destination for both economies.
For many years, manufacturers based in Pakistan and Bangladesh have relied on concessional terms of entry into European markets.
Mechanisms including the Generalised Scheme of Preferences (GSP) and the Everything But Arms (EBA) initiative helped cement Europe’s position as Pakistan’s second-biggest export market beyond Asia, and as Bangladesh’s foremost trading partner overall.
These arrangements gave both nations tariff-free and quota-free shipping privileges, most notably within the textile sector, an industry that forms the backbone of their overseas earnings.
Now, with roughly 93% of Indian exports set to receive expanded, duty-free entry into the European bloc, the agreement risks narrowing the competitive gap that has historically favoured Pakistan and Bangladesh over India in EU trade.
Clothing and textile products make up the overwhelming bulk of EU purchases from Pakistan, comprising 75.8% of total imports in 2024.
Garments dominate EU purchases from Bangladesh even more heavily, accounting for close to 94% of total imports in 2024.
Unlike its neighbours, India has historically lacked preferential trading terms with Europe. Before 2026, Indian exports entering EU territory were subject to standard Most Favoured Nation (MFN) duty rates.
These MFN rates represent the baseline, non-preferential tariffs that World Trade Organisation members apply to one another by default. Textile shipments, for instance, faced roughly 12% duties.
Even though burdened with these higher costs, India-EU commerce expanded by 90% across the last decade, according to Commission data.
Today, the EU stands as India’s biggest trading partner overall, with goods trade valued at €120 billion in 2024, equivalent to 11.5% of India’s total trade activity.
From the European side, India ranks ninth among the bloc’s trading partners, contributing 2.4% of total EU goods trade in 2024. Machinery, chemicals, base metals, minerals and textiles feature prominently among EU purchases from India.
Once formally ratified, the new agreement is expected to deepen this already substantial trading relationship further still. Scrapping duties on 90% of tariff categories, representing 91% of trade value — stands to significantly benefit India’s labour-intensive industries, spanning textiles, garments, footwear, jewellery and leather goods.
Reuters reporting indicates India currently holds just a 3% slice of the EU’s $250 billion apparel market, a sector presently led by China, Bangladesh and Vietnam owing to their more favourable tariff positions.
Yet with duty barriers now dismantled under the new pact, exporters anticipate considerably stronger momentum ahead. Trade bodies and market analysts project India’s textile and apparel shipments could expand by 20 to 25% annually once the agreement takes full effect, propelling the sector toward a targeted $100 billion export figure by 2030.
Even though implementation is not expected before 2027 at the earliest — pending ratification timelines within the European Parliament — merely announcing the deal has been enough to unsettle exporters across Pakistan and Bangladesh, who fear their long-cultivated advantages in the European marketplace now stand at risk.
“The EU-India accord threatens to fundamentally reshape Europe’s trading landscape, with the capacity to overturn competitive rankings that have held firm for years,” Bilaterals reported.
Whereas Pakistan and Bangladesh have built their export strategies around preferential trading schemes, India’s arrival on broadly comparable tariff footing introduces a formidable new competitor.
Image courtesy: Teksomolika on Freepik
