Bangladesh’s ready-made garment (RMG) exporters are expected to face intensifying competition and increasing price pressure in the European Union market after India and the EU concluded a landmark Free Trade Agreement (FTA) that will grant Indian apparel producers duty-free access to the bloc.
Under the deal, which is slated to take effect in 2027 after ratification by both parties, Indian clothing manufacturers will see tariffs on apparel shipments to the EU eliminated — a move that could erode Bangladesh’s long-held competitive edge built on preferential market access.
Competitive Shift in Europe’s Apparel Market
For decades, Bangladesh has benefitted from duty-free access to EU markets through the bloc’s least developed country (LDC) trade régime, helping it become one of the largest garment suppliers to Europe. In the 2024–25 fiscal year, EU nations accounted for more than half of Bangladesh’s total garment exports, worth around USD 19.7 billion.
Industry experts warn that once India enjoys permanent zero-tariff access, Bangladesh could struggle to maintain its market share, especially in price-sensitive segments such as denim, trousers and T-shirts — categories where it earlier overtook China in EU shipments.
“India’s strengths — its raw cotton base, large skilled workforce, and state support — could increasingly challenge Bangladeshi producers,” said Faisal Samad, director of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), noting that competitive pressure in Europe is likely to grow steadily.
Post-Graduation Tariff Risk
Bangladesh’s graduation from LDC status later this year will end automatic duty-free export access to the EU, triggering tariffs of about 12.5 % on garment exports unless Dhaka secures a successor arrangement such as GSP Plus or a bilateral trade pact. Without such safeguards, Bangladesh’s export margins could shrink significantly, analysts say.
With the EU and other global buyers now differentiating sourcing strategies — including turning to India after U.S. tariff hikes on Asian exporters — Bangladesh’s garment sector faces a dual challenge of intensifying competition and changing trade dynamics.
Calls for Policy Action
Business leaders in Bangladesh have described the FTA’s implications as a “wake-up call,” urging the government to accelerate trade diplomacy, pursue GSP Plus status, or negotiate a bilateral FTA with the EU to preserve market access and protect export revenues.
