India-EU free trade pact rattles Bangladesh

New Delhi, Jan 30 The EU–India free trade agreement has emerged as a major cause for concern in Dhaka as it delivers market access gains for India in the textiles, apparel, leather, and footwear sectors that have long underpinned Bangladesh’s export success in Europe, a Bangladeshi media report said.

"With Bangladesh set to graduate from LDC status in November 2026, and its preferential access to the EU market expected to erode after a three-year transition period, the timing of this deal could not be more unsettling," the article in the Daily Star newspaper said.

For decades, Indian exports of garments, textiles, leather, and footwear entered the EU facing substantial tariffs. However, the EU–India FTA would slash duties on footwear from 17 per cent to zero, and apparel and textiles from 9–12 per cent to zero, substantially strengthening India’s competitiveness, it pointed out.

This shift is particularly striking given that, in 2005, Bangladesh and India held almost identical market shares in the EU, but over the next two decades, Bangladesh was able to increase its share by threefold while India’s share declined to 5 per cent. Bangladesh’s rise was driven not only by tariff advantages but also by favourable EU rules of origin for LDCs, notably the single transformation rule, the article pointed out.

"Therefore, in a twist of irony, the very advantages of preferential margins that once propelled Bangladesh’s rapid ascent in the EU market are now eroding, just as key competitors secure permanent duty-free access through free trade agreements," it lamented.

Moreover, given the safeguard provisions embedded in the EU’s Generalised System of Preferences, there is a genuine risk that even if Bangladesh qualifies for GSP+ after graduation, its garment exports could still face full MFN tariffs, fundamentally altering the competitive balance in the EU market, the article observes.

It also highlights that the Indian government has set an ambitious target of $100 billion in textile and apparel exports by 2030, from currently around $40 billion, and backed it with a layered policy framework that combines output-linked subsidies, export rebate schemes that refund embedded taxes, input-side support, and extensive infrastructure and logistics investments. These measures reflect a sustained commitment to building competitiveness, scale, and upgrading capacity.

External developments further intensify the challenge. With US reciprocal tariffs constraining India’s export prospects, Indian exporters are likely to redirect efforts toward alternative markets. The EU–India FTA facilitates this shift, intensifying competition in Europe, with Bangladesh among those most exposed, the article added.

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