Experts, industry want govt to take two-pronged strategy

Bangladesh needs to jumpstart negotiation with its major export destinations as readymade garment (RMG) - the largest foreign-currency earner - will forfeit duty-free access to key traditional and non-traditional markets after the country's LDC graduation, experts say.

The experts and also industry leaders suggest that alongside taking preparation for the change, both the government and private sectors have to coordinate to apply for deferment of the graduation from the least- developed country (LDC) status or extension of the post-LDC transition period till 2032.

Bangladesh's key apparel-export markets include the European Union (EU), the United States, the UK, Canada, India, and Japan.

It is scheduled to graduate to a developing nation in November 2026.

According to the 2023 Ministerial Conference of the World Trade Organisation (WTO) held in Abu Dhabi, the LDC trade benefits would continue for three more years after graduation.

After the status upgrade, Bangladeshi garments will face duties ranging from 9.0 per cent to 20 per cent.

The possible duty is 12 per cent for the EU market, 11.5 per cent for the UK, 16.2 per cent for Canada, 9.0 per cent for Japan, 20 per cent for India, and 6.7 per cent for China.

Apparel makers want delayed graduation, arguing they need LDC trade benefits for several more years to sustain competitiveness on the global market.

The European Union, Canada, the UK, and Australia will continue LDC trade benefits for Bangladesh up to 2029, offering a three-year grace period.

Research and Policy Integration for Development (RAPID) Chairman Dr Mohammad Abdur Razzaque alerts that "time is extremely limited".

"Bangladesh should prepare and prioritise engagement with the EU, especially to get waived from the safeguard clause under which RMG will not get duty benefits following graduation, even with the Generalised Scheme of Preferences Plus (GSP+)," he told The Financial Express.

The safeguard clauses still exist in the current GSP facility, which is waived for LDCs.

He explains that the new EU GSP regime, scheduled to take effect from early 2028 for 10 years, also contains the clause.

Bangladesh should immediately take measures and engage with the EU to get the clauses withdrawn for both LDCs and GSP+, says Dr Razzaque.

"This has to be done within the next six to nine months as EU regulation changes need time for the agreement of all its members," he adds.

Regarding garment exporters' demand for deferred graduation or an extension of the post-LDC transition period for six years, he says Bangladesh can apply for the same simultaneously with its preparation as it may not be so easy.

Being an LDC, Bangladesh's case is different as it has received the maximum duty-free market- access benefits compared to any other LDC as a major garment-producing country in the new US tariff regime, Dr Razzaque notes.

The EU as a bloc is Bangladesh's largest export destination, where RMG exports grew significantly over the past decade mainly because of the duty benefits, insiders say.

According to Eurostat data, Bangladesh's RMG exports to the EU were worth €11.54 billion in 2015, which climbed to €18.28 billion in 2024 in a remarkable 58.45-percent growth.

Due to the ramped-up US tariffs, Bangladesh's major competitors like China, Vietnam, India, and Cambodia are focusing on enhancing their EU market shares, insiders say.

Bangladeshi RMG will face 12-percent duty in the EU after 2029, while it will gradually come down to zero for Vietnam by then because of the latter's free-trade agreement (FTA) with the 27-nation bloc, exposing products from Bangladesh to tough competition, they point out.

Besides, Bangladeshi apparel exports to Canada are falling following Vietnam's deal with the North American country under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.

Bangladesh shipped clothes worth $1.41 billion to Canada in 2024, according to International Trade Centre (ITC) Trade Map data.

It received $4.34 billion from RMG exports to the UK, $1.18 billion to Japan, $813.62 million to Australia, and $644.24 million to India in the last fiscal year, according to Export Promotion Bureau (EPB) data.

SM Khaled, managing director of Snowtex Apparels, tells The Financial Express business will "surely be affected if Bangladeshi garments face duties after graduation, causing exports to fall due to decreased demand".

Orders will also shift to other destinations, he says.

Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Mahmud Hasan Khan says they want duty benefits till 2032 as the facility will erode in the major markets like the EU and Canada after 2029.

The time is needed to prepare, he says, explaining preparations are needed both at the country and individual levels.

Explaining country-level preparedness, he mentions developing infrastructure and enhancing port efficiency to effectively handle export-import activities in order to reduce long lead time and increase speed to market.

He says the energy crisis has to be solved by providing cost-effective liquefied natural gas (LNG) and through gas exploration, which takes time.

Also, reducing the cost of doing business, bank-interest rates, and corruption is imperative, alongside having sufficient foreign-exchange reserves to do development works.

Admitting challenges in securing a post-LDC transition-period extension because of Bangladesh's position as the second-largest garment exporter and the gross domestic product (GDP) size, the BGMEA leader says the private sector and the government have to work together in this regard and to have the safeguard clause withdrawn.

"Whenever we request the safeguard clause withdrawal, the EU will impose conditions of ensuring labour rights, human rights, and others, for which we need time," he adds.

Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) Executive President Fazlee Shamim Ehsan says as the government cannot provide cash incentives after graduation, it should go for alternative support measures like reducing the cost of doing business and enhancing the ease of doing business.

"In developed countries' ports, goods are not held up for days, while the cost of production and business is not so high. Besides, bureaucratic tangles do not hamper business there," he says about the hurdles here, explaining the need to delay LDC graduation.

Former BGMEA president Faruque Hassan says they are producing value-added items, increasing productivity, and diversifying both products and markets as part of preparations.

He says for product diversification, especially manmade-fibre-based garments, they need government support like low-cost funds or funds for machinery to set up backward-linkage industries, which need huge investment.

Sector leaders also stress signing FTAs with the major markets and bilateral measures to sustain duty-free market access in the EU, Canada, India, Japan, and other countries in order to increase exports and attract foreign direct investment.

Munni_fe@yahoo.com