By Qudsia Bano

New trade rules introduced by the European Union (EU) and the United Kingdom (UK) are creating fresh opportunities for Pakistani exporters, although businesses will increasingly need to demonstrate labour compliance, sustainable production and stronger supply-chain transparency to retain and expand preferential market access.

The most significant development is the EU's new Generalised Scheme of Preferences (GSP) regulation, which will apply from January 2027 through December 2036. Existing GSP+ beneficiaries, including Pakistan, will continue enjoying preferential access until December 31, 2028, but must submit fresh applications to retain those benefits beyond that date. Countries that apply on time will continue to receive GSP+ preferences while the European Commission evaluates their applications.

The transition gives Pakistan a two-year window to strengthen compliance and secure continued preferential access to one of its most important export markets. According to the European Commission's July assessment, Pakistan remained the largest beneficiary of the GSP+ scheme, exporting €7.5 billion worth of eligible goods to the EU in 2024 and receiving an estimated €732 million in tariff exemptions. The EU accounted for 14.1% of Pakistan's total trade in 2025.

The European Commission's assessment for 2023-2025 also reinforced the growing link between trade preferences and compliance with international commitments on labour rights, human rights, environmental protection and governance. Reflecting this shift, Pakistan amended its Import Policy Order on July 8 in line with International Labour Organization commitments, further aligning domestic regulations with international trade requirements.

The UK has also introduced reforms that could benefit Pakistani exporters. Revised Developing Countries Trading Scheme (DCTS) rules, effective from January 2026, placed Pakistan in an expanded 18-country Asian cumulation group while retaining its Enhanced Preferences status, under which 92% of product lines continue to enjoy zero tariffs.

The revised rules also relax origin requirements for apparel exports by removing the double-transformation requirement and allowing between 47.5% and 100% of inputs, depending on the product, to be sourced from another country before final manufacturing takes place in Pakistan.

The new trade opportunities come at a time when Pakistan is seeking to revive export growth. Pakistan Bureau of Statistics data show merchandise exports declined 5.93% to $30.139 billion in FY2025-26 from $32.040 billion a year earlier. Exports in June alone fell 9.08% year-on-year to $2.252 billion. While knitwear, readymade garments and bedwear remained the country's largest export categories, basmati rice exports in rupee terms increased by 81.22% compared with June 2025, indicating continued growth potential in both traditional textile and selected agricultural products.

Speaking to Wealth Pakistan, Zainab Shah, a policy compliance professional at a Karachi-based textile exporter, said the revised origin rules could help Pakistan diversify beyond cotton-based exports into man-made fibre garments, performance wear and blended textile products.

"Exporters can source specialised fabrics more competitively, complete higher-value manufacturing in Pakistan and still qualify for preferences, provided documentation is robust," she said.

Shah added that businesses should view the EU transition as a commercial opportunity rather than merely a compliance exercise. Companies investing in supply-chain traceability, labour standards, chemical management and renewable energy reporting would be better positioned to secure long-term contracts from European buyers seeking reliable suppliers.

Speaking to Wealth Pakistan, Dr Lubna, Senior Economist at PRIDE Consulting (Pvt) Limited, said the changing trade rules could also create opportunities beyond textiles.

She said processed foods, rice-based products, leather goods, sports equipment, surgical instruments and light engineering products could benefit as international buyers increasingly seek alternative suppliers with transparent and verifiable production systems.

Dr Lubna stressed the need to strengthen testing laboratories, digital certificates of origin and product-standard compliance so that smaller exporters can fully utilise preferential trade arrangements.

"Tariff preferences create opportunities only when exporters can quickly demonstrate product origin, safety and sustainability. Shared certification facilities and faster recognition of standards can help convert new trade rules into actual export orders," she said.

The latest EU and UK trade reforms indicate that preferential market access is becoming increasingly linked to compliance, sustainability and transparent supply chains. For Pakistan, translating these policy changes into higher exports will depend on how quickly businesses and regulators adapt to the evolving requirements of international markets.

Credit: INP-WealthPk