For Bangladesh’s apparel industry, the clock could not be ticking louder. As per estimates, the European Union is Bangladesh’s largest single export destination, absorbing roughly 50 per cent of the country’s total shipments. Further, more than an estimated 90 per cent of those EU-bound exports are reportedly made up of readymade garments, even as the Everything But Arms (EBA) scheme has long kept tariffs at zero, handing exporters a crucial price edge that powered decades of rapid growth and global dominance.
Bangladesh is reportedly simultaneously pursuing an EU free trade agreement and GSP Plus status to protect its exports as duty-free access ends after LDC graduation.
With the EU buying nearly half its exports, delays in an FTA and stronger competition from India and Vietnam, stakeholders believe, could erode the country’s hard-won edge in its biggest market.
However, things are now set to change.
Bangladesh is due to graduate from LDC status in November this year, although the Government has sought a three-year deferment. Even if the request is not approved, exporters are expected to continue to enjoy EU trade preferences until 2029 under a transitional arrangement. After that, the tariff-free ride ends unless a new framework is in place.
Meanwhile, a recent study by a renowned private, non-profit and non-partisan research organisation based in Bangladesh warned that Bangladesh’s exports could face a sharp decline after the country graduates from the least developed country status if it fails to secure a preferential trade arrangement with the European Union.
According to the study, Bangladesh’s total exports to the EU could fall by more than 36 per cent, while RMG exports could decline by over 43 per cent if the country is subject to the EU’s Most Favoured Nation (MFN) tariffs.
Competition is adding pressure, with India and Vietnam—Bangladesh’s main competitors in apparel—already enjoying EU trade agreements. If Bangladesh starts facing tariffs while they retain preferential access, buyers could shift orders, squeezing an industry where even the smallest cost difference matters.
That looming risk explains why Dhaka is reportedly keeping two negotiations alive instead of one.
Formal talks on an FTA are still some distance away. As per media reports, Bangladesh and the European Commission have only begun exchanging communications to prepare the ground for negotiations on a possible Economic Partnership Agreement, Comprehensive Economic Partnership Agreement or a conventional FTA. However, such negotiations are notoriously slow, making it difficult to rely on an agreement before existing trade preferences expire.
GSP Plus offers a potentially quicker route. The scheme rewards developing countries that meet stringent benchmarks on labour rights, human rights, environmental protection and governance. Bangladesh reportedly believes the recent labour reforms, including amendments to labour legislation and the ratification of three International Labour Organization conventions, have significantly strengthened its case.
But GSP Plus is far from a silver bullet, many believe. Under the EU’s current rules, apparel exports exceeding certain import thresholds lose preferential treatment. Bangladesh already ships nearly one-fifth of the relevant clothing imports into the EU and accounts for almost half of all GSP-covered apparel imports, well above the prescribed limits. That means even if Dhaka secures GSP Plus, a substantial portion of its garment exports may still face tariffs.
The numbers underline what is at stake. Bangladesh reportedly exported €19 billion of goods to the EU under the EBA scheme in 2024, with a utilisation rate of 96 per cent. Meanwhile, overall goods trade reportedly reached €23.3 billion in 2025, with clothing remaining the overwhelming driver of the relationship.
As the transition away from LDC status approaches, Bangladesh’s twin-track approach reflects a pragmatic effort to safeguard its largest export market. Nevertheless, an FTA with the EU, while it could offer a long-term solution, is unlikely to materialise quickly. At the same time, GSP Plus may provide only partial relief given existing import thresholds. For the country’s garment sector, maintaining competitiveness in Europe may ultimately depend not only on preferential market access but also on continued improvements in productivity, compliance and supply chain resilience.
Fibre2Fashion News Desk (DR)
