A free-trade agreement (FTA) between Bangladesh and the European Union could limit deep garment- export drop due to loss of duty-free facility after the country's LDC graduation, according to a latest research.
As post-LDC tariff cliff collides with zero-duty market access secured by chief regional rivals India and Vietnam through aggressive free-trade pacts, Bangladesh's garment export to the EU market might contract up to 44 per cent.
According to trade analysts and recent impact modeling, the convergence of duty-facility losses stemming from the upcoming least-developed country (LDC) graduation with the competitive asymmetry created by India and Vietnam's newly weaponised FTAs is a matter of concern that has sparked urgent calls for a radical re-engineering of the country's economic diplomacy and product mix.
With both the EU-India and EU-Vietnam FTAs in force, Bangladesh's overall exports to the bloc could fall by up to 36 per cent and the rate is 44 per cent for garments, according to the research paper prepared by RAPID.
A Bangladesh-EU FTA could limit the overall export decline to around 16 per cent and garments to19 per cent, it shows.
"EU FTAs with Vietnam and India will intensify competitive pressure on Bangladesh as FTAs can divert trade towards partner countries by narrowing or eliminating tariff differences," Dr MA Razzaque, says chairman of Research and Policy Integration for Development (RAPID).
Under the EVFTA, the EU tariffs on Vietnamese exports are being progressively reduced to reach zero by 2027.
Once implemented, the EU-India FTA will give India preferential access in sectors that overlap closely with Bangladesh's, including apparel, textiles, leather and footwear.
Bangladesh, meanwhile, risks losing its duty-free market access currently enjoyed as an LDC that will continue for three years after graduation and facing MFN tariffs.
Even if, after graduation, Bangladesh qualifies for GSP-plus window, its garments will not get duty- free access due to the safeguard clauses of the scheme, he has noted.
"Bangladesh could face a double preference erosion: competitors gain duty-free access while its own tariff advantage disappears," Mr Razzaque has said.
About 90 per cent of Bangladesh's exports to the European Union are heavily concentrated in knitwear and woven garments, according to the RAPID findings.
Both India and Vietnam export a diverse range of products to the EU, with garments accounting for only about 6.0 per cent to 8.0 per cent of their exports.
Bangladesh's top 15 apparel exports to the EU, all cotton-based, account for more than one-third of extra-EU imports in those product categories.
The corresponding shares are about 3.0 per cent for Vietnam and 6.0 per cent for India.
Bangladesh may face strong competition from Vietnam in MMF-based apparel exports to the EU.
The research has also shown strict rules-of-origin requirement as a constraint facing Vietnam's export expansion under the EVFTA.
Vietnam's dependence on China's low-cost fabrics makes it challenging to meet the requisite value addition for exported products under EVFTA.
Asked about the emergent trade situation, Mohammad Hatem, president of Bangladesh Knitwear Manufacturers and Exporters Association, said Vietnam and India are the biggest challenge for local garment export to the EU due to their FTAs with the bloc which allows them duty -free facility.
"As Bangladesh is yet to take any tangible measures in signing such trade pact, buyers have already started developing alternative sourcing bases well before Bangladesh's preferential trade benefits expire," he noted.
Moreover, the Indian government has taken measures aggressively to draw foreign direct investment and help local exporters to remain competitive through a number of packages.
Talking to The Financial Express, BGMEA President Mahmud Hasan Khan has said global buyers are also increasing their sourcing from India due to its increasing competitiveness mostly because of its integrated supply chain, cost advantages while it has diversified products with strong presence in hometex, technical textile and synthetic fibres.
Both the apparel-sector leaders have said Bangladesh must respond through market-access diplomacy and domestic- competitiveness reforms and start preparation for a Bangladesh-EU FTA to secure post-LDC market access.
Commerce ministry sources have said to retain the duty benefit, Bangladesh has made a proposal to the EU for signing free-trade deal.
The EU also wanted to know about the details of negotiation team, the country's policy in this regard, they added.
The EU Ambassador in Bangladesh, Michael Miller, recently said Bangladesh should accelerate reforms, including removal of non-tariff barriers and improvements in the business environment to pave the way for advancing talks on an FTA with the EU, adding that the EU is ready to begin exploratory discussions on an FTA.
The RAPID paper has also suggested seeking workable rules of origin and transitional safeguards for apparel and diversifying exports beyond cotton garments and expanding MMF-and higher-value products.
It has also recommended attracting export-oriented FDI to support technology, skills-and new-product development, reducing trade costs through tariff reform, better logistics, reliable energy and faster customs clearance and strengthening compliance with EU labour, environmental, traceability and supply-chain requirements.
"Preferential access alone will not be enough. Bangladesh must combine an EU trade agreement with sustained improvements in productivity, diversification and compliance," it reads.
Nazma Akter, a labour leader, has said thousands of workers lost jobs due to factory closure during last six months and export fall due to post-graduation challenges would further worsen the job market, especially for women.
The government should take timely measures to sustain market competitiveness and also safeguard employment.
By leveraging LDC duty-free access, Bangladesh has been able to expand its share of the EU apparel market at a remarkable pace.
China's share in EU apparel imports declined from 45 per cent in 2010 to 28 per cent in 2025, while Bangladesh's share rose sharply from about 7.0 percent to 21 per cent.
According to Eurostat data, Bangladesh garment exports to the EU stood at 19.41 billion euros in 2025 which was 14.29 billion euros in 2021.
On the other hand, India's apparel exports to the EU increased to 4.52 billion euros in 2025 from 3.39 billion euros in 2021.
Vietnam earned 4.37 billion euros in 2025 which was 2.86 billion euros in 2021.
Munni_fe@yahoo.com
