Pakistan’s Economic Relations with the European Union (2013-2023): Challenges, Opportunities and Policy Lessons

Abstract

The relations between the European Union (EU) and Pakistan are shaped by interrelated political, economic, and strategic factors. Pakistan’s economic relations with the EU are shaped by its GSP+ status. In 2014, the EU granted Pakistan GSP+ status upon its ratification of all international conventions required for admission to the scheme. The primary aim of the GSP+ scheme is to assist developing countries in alleviating poverty, promoting good governance, and fostering sustainable development. The scheme offers these states opportunities to trade with the EU at low or no tariffs, generating additional revenue. While Pakistan is currently the largest beneficiary of the GSP+ scheme, several challenges, primarily related to the diversification and competitiveness of its exports, limit the scope of its economic ties with the EU. However, the country can address these challenges and upgrade economic relations with the EU. Drawing on David Ricardo’s theory of comparative advantage and the Heckscher-Ohlin model, and employing a qualitative research approach, this study analyzes Pakistan-EU trade relations to examine the challenges and opportunities and offers policy lessons to enhance Pakistan’s economic relations with the EU.