Bangladesh’s garment exporters are set to face tougher competition and growing price pressure in Europe after the European Union and India reached a sweeping free trade deal that will grant Indian clothing manufacturers duty-free access to the bloc.
The agreement, announced on Tuesday, is expected to come into force in 2027, following vetting by the European Council, the European Parliament and India’s parliament.
After it takes effect, the EU’s tariff on Indian apparel products will drop to zero from the existing 12 percent, potentially eroding a long-standing advantage enjoyed by Dhaka.
Under the deal, the EU hopes to double its exports to India by 2032 through the elimination and reduction of tariffs on 96.6 percent of traded goods by value, generating estimated savings of €4 billion in duties for European companies. In return, the EU will cut tariffs on 99.5 percent of goods imported from India over a seven-year period.
Bangladesh currently ships garments duty-free to the EU, but that benefit will continue only for three additional years after its graduation from the least developed country (LDC) bracket, scheduled for November this year.
“The implications will be significant, particularly for apparel,” said Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD). He warned that Bangladesh will become less competitive in the EU market once India secures duty-free access.
Riding on preferential access to the EU since 1975 under the bloc’s LDC trade facility, Bangladesh has become the EU’s second-largest garment exporter after China, even overtaking it in some categories such as denim, trousers and T-shirts. Industry leaders claim that in the EU, one in every three people wears Bangladeshi-made denim trousers.
In the 2024-25 fiscal year, EU countries accounted for more than 50 percent of Bangladesh’s total garment exports, amounting to $19.71 billion.
If Bangladesh fails to secure a successor arrangement, such as a bilateral free trade deal or GSP Plus status after LDC graduation, it will face nearly 12.5 percent duty on garment exports to the EU after 2029. In contrast, India and Vietnam will continue to enjoy zero-duty access through free trade agreements.
Following recent US tariff and trade policy shifts, the EU has emerged as the principal battleground for apparel exporters, intensifying competitive pressure.
“This sudden oversupply has shifted bargaining power towards EU buyers, enabling tougher negotiation terms with suppliers and shorter lead-time expectations,” BRAC EPL, a brokerage firm, said in a research note. “This dynamic has structural implications for Bangladesh’s export margins.”
Faisal Samad, director of the Bangladesh Garment Manufacturers and Exporters Association, said although the EU-India deal would not impact Bangladesh’s exports immediately, its effects will be felt gradually.
He said India’s competitiveness rests on two major strengths — raw cotton and human resources — along with extensive financial and policy support from the Indian government.
Still, Bangladesh retains several advantages, Samad said, including domestic production capacity and strength in key products such as denim, trousers, T-shirts, sweaters, formal woven shirts, lingerie and undergarments, Samad said.
Exporters are working to diversify into higher-end, value-added products, while the government is negotiating with Brussels to sign a free trade deal, he added.
Analysts said Bangladesh must urgently strengthen its trade diplomacy to prevent a deterioration in EU market access.
“Bangladesh should take the preparation for obtaining the GSP Plus status to the EU and also take preparation for signing the bilateral free trade agreements to retain market access,” said CPD’s Mustafizur.
“The Indian apparel policy also indicates that the country is coming in a big way in the apparel sector and textile sector,” he said, adding that India also has a natural advantage due to its raw cotton base.
Fazlul Hoque, managing director of Plummy Fashions, a Narayanganj-based knitwear factory exporting mainly to Europe, said the shift could further weaken Bangladesh’s price competitiveness. He warned that if Bangladesh is forced to pay duties while rivals continue enjoying duty-free access, buyers would have stronger incentives to demand lower prices and shift orders elsewhere.
WAKE-UP CALL
Industry leaders described the EU–India agreement as a “wake-up call” and urged the government to move quickly to preserve preferential access to Europe.
Showkat Aziz Russell, president of the Bangladesh Textile Mills Association, said Bangladesh’s competitiveness must be reinforced through tax benefits and incentives for the local industry.
Mohammad Hatem, president of the Bangladesh Knitwear Manufacturers and Exporters Association, criticised what he described as long-running policy failure for not securing any durable EU trade advantage, such as an FTA or GSP Plus access, unlike key competitors.
He also said business leaders had urged the government to pursue a trade deal with Russia to secure zero-duty benefits, but it did not happen. He added that they had also demanded Bangladesh seek an LDC graduation deferment, but the government did not do so.
Mohammad Abdur Razzaque, a trade analyst and chairman of Research and Policy Integration for Development, said the RMG sector’s vulnerability in Europe would intensify as the EU–India agreement is implemented.
https://www.thedailystar.net/news/bangladesh/news/eu-india-trade-deal-bangladeshi-exporters-face-tougher-days-4093041
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