Issue Brief on “The India-European Union (EU) Free Trade Agreement (FTA): How it Will...

On 27 January 2026, the Brussels and New Delhi formally signed an historic Free Trade Agreement (FTA), the negotiations on the agreement had taken place over almost 20 years in intermittent pauses and renewed diplomatic interest, with both parties finalising a comprehensive trade deal connecting markets with an estimated population of almost two billion people, and an estimated market value of over US$24 trillion.[1] Although the Agreement will mainly enhance the economic relationship between India and European Union (EU), its spill over impacts are felt throughout South Asia. For Pakistan, whose export market overwhelmingly relies upon textile and apparel goods that are sold to the European markets, the EU-India FTA offers a new competitive environment. Historically, Islamabad enjoyed preferential treatment by the EU according to the European Union's Generalised Scheme of Preferences Plus (GSP+) scheme, which allows 85 percent of exports to enter the EU without duty.[2] Nonetheless, as India is gaining wider tariff concessions, the relative advantage of Pakistan is in danger of being lost. Therefore, the EU-India FTA is not just a bilateral trade agreement but a strategic development that has an economic and policy consequences to the export competitiveness, trade diplomacy and long-term economic planning of Pakistan.

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