Key Takeaways
- A proposed India-EU trade deal could severely challenge Bangladesh’s dominance in the EU’s garment market.
- Bangladesh’s upcoming graduation from Least Developed Country status will remove its duty-free access to the EU.
- New EU environmental rules and India’s industrial scale could accelerate the shift in market share.
A potential free trade agreement between India and the European Union threatens to reshape the global textile trade, with a new report warning it could “wipe out” Bangladesh’s long-held dominance in the EU’s readymade garment market.
The report from the Centre for Social and Economic Progress (CSEP) highlights a perfect storm for Bangladesh. The country is set to graduate from Least Developed Country status around 2026, which will phase out its duty-free access to the EU under the “Everything But Arms” scheme. This coincides with the potential India-EU FTA, which would grant Indian apparel similar or better tariff advantages.
A Double Blow for Bangladesh
“The combination of Bangladesh’s LDC graduation and a potential India-EU FTA could be a double whammy for Bangladesh’s apparel exports to the EU,” the CSEP report states. It warns of a “significant erosion” of market share for Bangladesh in one of its largest export destinations.
The stakes are high. In 2023, the EU imported €18.7 billion worth of apparel from Bangladesh, compared to €7.1 billion from India. Economic modelling in the report predicts that removing EU tariffs on Indian apparel would allow Indian exports to capture a substantial portion of the market, primarily at Bangladesh’s expense.
Beyond Tariffs: The Compliance Advantage
The shift isn’t just about tariffs. The EU’s new Carbon Border Adjustment Mechanism (CBAM) and deforestation regulations favour countries with stronger environmental compliance—an area where India may hold an edge. Furthermore, large Indian conglomerates are better equipped to handle the EU’s demand for large-volume orders than Bangladesh’s many small and medium-sized factories.
The analysis calls for urgent action from Bangladesh. To counter the threat from its regional neighbour, the country must enhance competitiveness by boosting productivity, investing in sustainable manufacturing, and diversifying its export markets.
