Trade agreements are often celebrated as diplomatic and economic milestones. In reality, they are merely tools — and like all tools, their value depends on how and when they are used. In Pakistan’s case, market-access agreements have too often been pursued as symbols of success rather than as carefully calibrated instruments of industrial policy. This misreading has proved costly.
Trade agreements deliver results only when they open markets for goods that an exporting country can produce competitively and in volumes the importing country actually demands. Pakistan has frequently ignored this basic test. As a result, many of its agreements have underperformed, offering limited export gains while accelerating imports.
Lacking a clear comparative advantage, Pakistan has liberalised its markets faster than its industry has matured. Export growth has remained modest and narrowly concentrated, often in low-value commodities such as raw cotton — materials that should ideally be processed into higher-value products at home. Even early gains have been diluted as key partners, notably China, have extended better terms to more competitive blocs such as the Association of Southeast Asian Nations (Asean).
Trade agreements reward competitiveness; they do not create it.
Learning from Vietnam
Vietnam’s experience offers a telling contrast. Rather than chasing agreements for diplomatic prestige, Hanoi focused on securing access to markets where demand already existed, while simultaneously investing in domestic capabilities. The country negotiated predictable entry into major consumer markets — including the US, the EU, and key Asian economies — for products it was deliberately building the capacity to export, such as electronics, machinery, footwear, furniture, and other manufactured goods.
In Vietnam, trade agreements complemented a coherent export-led industrial strategy. They were not substitutes for reform but reinforcements of it.
Pakistan, by contrast, has often signed agreements before establishing a competitive industrial base or a stable policy environment. When production costs are high, supply chains fragmented, and firms struggle with compliance, free trade agreements tend to favour imports. The predictable outcome is stagnant exports and rising trade deficits.
Asymmetry without preparation
The China–Pakistan Free Trade Agreement illustrates this imbalance. By opening its market to the world’s largest manufacturing economy without first strengthening domestic competitiveness, Pakistan exposed its industries to overwhelming competition. Subsequent revisions improved tariff schedules on paper, but many concessions applied to products China does not import or Pakistan does not produce in meaningful quantities.
Once these mismatches are accounted for, the headline promise of duty-free access on 75 per cent of tariff lines by 2030 shrinks to a practical benefit of roughly 23pc. Tariff elimination is meaningless if it does not apply to goods Pakistan can supply at scale.
Meanwhile, Pakistani firms continue to grapple with high energy costs, unpredictable taxation, weak skills, fragmented supply chains, and poor trade facilitation. In this environment, even improved agreements fail to translate into sustained export growth, while imports surge and erode local industry. The deeper problem lies in the lack of coordination between trade concessions and domestic reform, alongside weak enforcement of safeguards, rules of origin, and performance benchmarks.
Imbalances with Malaysia and Indonesia
A similar pattern is visible in Pakistan’s agreements with Malaysia and Indonesia. Concessions have centred largely on palm oil, with little alignment to Pakistan’s export strengths or to partner-country demand for Pakistani goods.
Both Malaysia and Indonesia are also bound to prioritise Asean members, limiting the scope for genuine market access. Bilateral trade has expanded, but overwhelmingly in their favour. Imports have risen sharply, while Pakistani exports lag behind. Cheaper edible oil imports, for example, have benefited consumers in the short term but undermined incentives for domestic production.
The missed African opportunity
Africa remains a largely untapped frontier. With 54 countries, a population of 1.6 billion, and a combined GDP of $3 trillion, the continent offers significant potential. Yet Pakistan has only one trade agreement in the region — with Mauritius, a country of 1.3 million people and a $16bn economy.
India, by contrast, has agreements with 17 African nations and a far deeper commercial footprint. Mauritius accounts for less than 1pc of Pakistan’s trade with Africa. India has also concluded six agreements with Latin American countries; Pakistan has none.
While pursuing agreements without export capacity would be unwise, the absence of any proactive strategy to cultivate new markets points to a broader policy failure.
Türkiye and familiar risks
Türkiye is often described as a close partner, but sentiment does not override economic reality. The two countries compete directly in sectors such as textiles and apparel — the backbone of Pakistan’s exports. Expanding access for Turkish value-added goods without securing meaningful reciprocal benefits would place further strain on Pakistan’s already fragile industrial base.
The current preferential arrangement remains cautious for good reason. Without sequencing reforms and strengthening competitiveness, a broader agreement risks repeating the import-heavy outcomes seen elsewhere.
Tempered expectations with Vietnam
Calls for a trade agreement with Vietnam should also be viewed realistically. Vietnam enjoys advantages in cost, scale, quality, and product diversity across most manufacturing sectors. Overlap between Pakistan’s export capacity and Vietnam’s import demand is limited — and where it exists, Pakistan is rarely the more competitive supplier.
Such an agreement might yield modest gains in niche areas, but without deep domestic reform, it would likely benefit Vietnamese exporters far more than Pakistani ones. Vietnam’s success underscores a central lesson: trade agreements reward preparedness; they do not compensate for its absence.
A market-access test for Pakistan
Before entering, expanding, or revising any trade agreement, Pakistan should apply a simple test. Does the agreement target sectors where demand exists and where Pakistan can scale production within three to five years? Have domestic cost and compliance barriers been addressed? Are concessions phased, protected, and tied to measurable outcomes? Is there capacity to enforce rules of origin and standards? And are agreements regularly reviewed against export performance, with clear mechanisms for renegotiation?
Trade agreements are policy instruments, not achievements in themselves. Pakistan must move away from treating free trade deals as headline victories and instead deploy them as disciplined components of industrial policy — focused on building sustainable comparative advantage, not masking its absence with perpetual liberalisation.
The writer, a former CEO of Unilever Pakistan and of the Pakistan Business Council, serves on the boards of several public companies.