Days after India signed a commerce cope with the USA, Bangladesh on Tuesday (February 10) struck a contemporary commerce cope with Washington, securing zero reciprocal tariffs on sure textile and attire items and a 19% reciprocal tariff in comparison with 20% earlier, which has despatched shares of Indian textile exporters tumbling.
“The US commits to establishing a mechanism that may enable for sure textile and attire items from Bangladesh to obtain a zero reciprocal tariff price. This mechanism will present {that a} to-be-specified quantity of attire and textile imports from Bangladesh can enter the USA at this lowered tariff price,” the Bangladesh-US joint assertion mentioned.
Nonetheless, the assertion added that the amount of duty-free textile and attire merchandise from Bangladesh to the US can be decided on the idea of Dhaka’s imports of “U.S.-produced cotton and man-made fibre textile inputs” from Washington. Bangladesh is the second-largest exporter of textiles and attire items after China.
Steep commitments by Dhaka
A Commerce and Trade Ministry official mentioned that Bangladesh has considerably opened its financial system to the US in trade for a slight acquire in textiles. “India has protected a number of sectors that Bangladesh has opened. The deal needs to be seen in its entirety,” the official mentioned in response to a question by this newspaper.
Below the settlement, Bangladesh has dedicated to supply “vital preferential market entry for U.S. industrial and agricultural items”. Dhaka has dedicated to buying $3.5 billion of US agriculture merchandise, like wheat, soy, cotton, and corn, and $15 billion price of power merchandise in 15 years.
Two-fold problem for India
Confederation of Indian Textile Trade (CITI) Chairman, Ashwin Chandran, mentioned that the US-Bangladesh deal opens a contemporary problem for India’s textiles and attire exporters.
“This problem is two-fold. First, the tariff differential between India and Bangladesh has halved from 2% to 1% (India faces an 18% US tariff), which is a matter of concern in a sector with slim revenue margins. Secondly, the US–Bangladesh Settlement on Reciprocal Commerce may probably adversely have an effect on India’s cotton yarn exports to Bangladesh,” Chandran mentioned.
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Bangladesh is already among the many main exporters of textiles and attire to the USA, alongside China, Vietnam, and India. Any extra benefit for Bangladesh may additional improve competitors for Indian exporters.
18% drawback in comparison with Dhaka
Worldwide commerce professional and former commerce negotiator, Abhijit Das, mentioned, “Until late final night time, we have been below the impression that India would have the ability to broaden textile exports to the US reciprocal tariffs have come right down to 18% whereas a few of our opponents, reminiscent of Bangladesh, would face 19%, a number of the others, reminiscent of Vietnam, would face 20%, and many others.
Right now, we see an announcement from the White Home which says that Bangladesh and the US have reached a deal whereby, in respect of textiles, the US will deliver down reciprocal tariffs to zero, topic to quota. The dimensions of the quota is just not recognized, however what is sort of prone to occur is that the perceived tariff benefit, which we imagined we might have over Bangladesh by about one share level, will get reversed right into a tariff drawback of 18% in comparison with Bangladesh.”
Dhaka’s commerce strikes in response to Indian offers
Dhaka, which is in the midst of a basic election, sprang into motion after a slew of Indian commerce offers with the UK, US and EU that may notably profit labour-intensive sectors such because the textile and footwear sectors. That is regarding for Bangladesh as it’s the second-largest textile exporter on this planet after China. The sector can also be Dhaka’s key international trade earner.
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Bangladesh can also be pushing for a Free Commerce Settlement (FTA) with the European Union after India gained a aggressive edge within the textile sector with a commerce settlement with the European bloc and the UK. In 2024, India accounted for round 5% of the EU’s textile and attire imports, whereas China led the pack (28%), adopted by Bangladesh (22%), Turkey (11%), Vietnam (6%), and India.
Bangladesh Chief Adviser Professor Muhammad Yunus, on February 1, referred to as for an early begin to FTA negotiations with the European Union, after graduating from Least Developed Nation (LDC) standing. The change of standing will end result within the nation dropping a number of commerce concessions.
Low in India-Bangladesh ties
Commerce offers signed by Bangladesh and India additional assume significance as ties between New Delhi and Dhaka have soured in the previous couple of months. In April final yr, New Delhi terminated the transhipment facility for Bangladesh’s export cargo. In 2020, India permitted the transhipment of export cargo from Bangladesh to 3rd nations utilizing Indian Land Customs Stations en path to Indian ports and airports, to allow clean commerce flows for Bangladesh’s exports to nations reminiscent of Bhutan, Nepal, and Myanmar.
This got here after Yunus had remarked that with Northeast India being “landlocked”, Dhaka was the “solely guardian of the ocean for all this area”. This assertion was extensively interpreted as an try by Dhaka to say its leverage over entry to the Northeast — a matter of concern for Delhi. Yunus’s efforts to painting Beijing as a brand new strategic accomplice had additional difficult the already tense India-Bangladesh relationship.
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“The seven states of japanese India, generally known as the Seven Sisters, are a landlocked area. They don’t have any direct entry to the ocean,” Yunus mentioned. “We’re the one guardians of the ocean for this whole area. This opens up an enormous alternative. It may turn into an extension of the Chinese language financial system — construct issues, produce issues, market issues, deliver items to China and export them to the remainder of the world,” he added.
The North-Japanese states of Assam, Arunachal Pradesh, Manipur, Meghalaya, Nagaland, Mizoram, Tripura and Sikkim collectively have a 1,596 km lengthy worldwide border with Bangladesh, 1,395 km border with China, 1,640 km border with Myanmar, 455 km border with Bhutan and 97 km border with Nepal, however are solely linked with the remainder of India by a 22 km strip of land referred to as the ‘Rooster Neck’ hall.
During the last decade-and-a-half, India sought to have interaction with the Sheikh Hasina authorities in Dhaka to open pathways to the Northeast by way of Bangladesh. Nonetheless, after Hasina’s ouster and the set up of an interim authorities led by Yunus, these plans have fallen by.
