Restricting yarn imports could cost $2.4b, put 0.4m jobs at risk

The country's apparel makers have warned that restrictive measures on imported cotton yarn could trigger a staggering US$ 2.4 billion annual cost shock for the country's export-oriented apparel sector and put up to 0.4 million jobs at risk.

They have urged the government to adopt a phased 10-year transition roadmap, sources said.

In a letter sent on February 16 to the Ministry of Finance, BGMEA President Mahmud Hasan Khan said any abrupt curbs on yarn imports under HS codes 5205-5207 would sharply raise production costs, erode competitiveness, and destabilise Bangladesh's $40-billion ready-made garment (RMG) industry.

According to a cost-shock simulation presented by the trade body, if imported yarn faces higher protective measures -- including a 40 per cent price escalation scenario -- the RMG sector could incur an additional annual burden of around $2.4 billion at the FOB level.

Even under a 20 per cent safeguard duty hike, the additional cost could exceed $1.2 billion, significantly squeezing exporters' already thin margins amid intense global competition.

The BGMEA argued that Bangladesh's apparel exporters operate in a highly price-sensitive global market, where buyers are reluctant to absorb cost increases.

As a result, any surge in raw material prices would directly hit manufacturers' profitability and order volumes.

The trade body expressed concern that a sharp contraction in export orders stemming from higher yarn costs could lead to a 5.0-10 per cent decline in production capacity in the initial phase.

The labour force in the RMG sector is nearly five times larger than the textile sector, according to the letter.

The BGMEA warned that the RMG sector employs more than 4.0 million workers, mostly women, and even a moderate contraction could translate into job losses of up to 0.4 million, creating significant social and economic repercussions.

Reduced factory utilisation would not only affect direct employment but also backward linkages, transport, packaging, and other support services.

Instead of imposing immediate restrictions, the BGMEA proposed a 10-year strategic roadmap to strengthen the domestic spinning sector without jeopardising export competitiveness.

The plan includes gradual capacity enhancement of local spinning mills through technology upgrades and productivity gains, ensuring uninterrupted gas and power supply at competitive tariffs, facilitating access to long-term, low-cost financing for modernisation, encouraging diversification into specialised and value-added yarn segments, and implementing phased policy adjustments aligned with export performance benchmarks.

The body argued that such a calibrated approach would allow domestic mills to improve efficiency and competitiveness while preserving the RMG sector's global market share.

The association also noted that recent growth in yarn imports reflects post-pandemic demand recovery and product diversification, not abnormal dependency.

Imported yarn often offers specific counts, quality grades, and certifications that are insufficiently produced or unavailable locally, particularly for high-value and specialised garments.

The BGMEA warned that blanket restrictions could distort supply chains and shift orders to competing countries.

It requested policymakers to carefully weigh the broader macroeconomic implications before introducing protective measures.

"A sudden policy shift may undermine export earnings, foreign exchange inflows, and employment stability," the letter said, calling for stakeholder consultations and evidence-based reforms.

The association emphasised that safeguarding the long-term sustainability of both spinning mills and garment exporters requires a balanced and time-bound reform strategy, rather than abrupt trade barriers that could trigger a multi-billion-dollar cost shock.

The letter further noted that Bangladesh imports nearly 95 per cent of its sustainable and organic cotton from India, including organic cotton, Traceable BCI, Primark PSCP fibre, Regenagri, DTF, recycled, and Fair Trade-certified cotton.

Global buyers have significant demand for these materials, which are not produced locally.

The BGMEA expressed concern that restricting yarn imports could increase reliance on grey fabric imports, heightening supply chain risks.

If yarn imports are curtailed, international buyers may instruct manufacturers to import grey fabric directly instead of sourcing yarn for local knitting and processing.

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