Bangladesh’s ready-made garment (RMG) exports to the European Union (EU) are likely to decline by as much as 21 per cent due to the dual challenges posed by the EU-Vietnam Free Trade Agreement and Bangladesh’s upcoming graduation from the Least Developed Country (LDC) status, according to a recent study by RAPID and the Friedrich-Ebert-Stiftung.
Currently benefiting from duty-free access to the EU under the Everything But Arms (EBA) initiative, Bangladesh faces the prospect of tariffs up to 12 per cent starting in 2029. In contrast, helped by efficient trade policies and investments in its supply chain, Vietnam is likely to enjoy zero-duty access to the EU by 2027 under its FTA.
Bangladesh's slower progress in backward integration and trade policy implementation exacerbates its vulnerability, threatening its global competitiveness. The study emphasises the urgency of negotiating extended transition periods for LDC graduation, relaxing rules of origin under the Generalised Scheme of Preferences (GSP+), and pursuing additional FTAs to maintain market access.
To counter these challenges, the report underscores the need for strategic reforms including engaging with the EU to extend LDC benefits and relax GSP+ conditions, investing in sustainable practices, including man-made fibers and recycling technologies, to align with EU standards, addressing energy supply deficits and enhancing trade logistics to improve efficiency and reducing dependency on apparel exports by exploring new sectors and markets.
While rising labor costs in China and Vietnam could redirect some orders to Bangladesh, the report cautions that internal hurdles, such as energy shortages and inefficiencies in banking systems, continue to undermine growth potential. Additionally, ongoing FTA negotiations with Japan and Singapore offer hope but require structural reforms to unlock their full benefits.
The study concludes that Bangladesh must act swiftly to adopt forward-thinking policies and meet global sustainability standards to retain its position as a leading export hub. Failure to do so could significantly impact its economic trajectory as competitors like Vietnam continue to gain ground in the lucrative EU market.
