Bangladesh is set to commission a feasibility study to explore a free trade agreement with the European Union, aiming to preserve duty-free access to the EU market after it graduates from the Least Developed Country (LDC) status next November.
An inter-ministerial meeting is planned for next month to advance the process, with representatives from various ministries, departments, and agencies to provide input. The gathering had been postponed recently and will now take place next month.
More than 60% of Bangladesh’s exports, about US $ 25 billion annually, currently go to the EU. Although duty-free access is in place, that concession is extended for only three more years, through 2029. After that, products that do not benefit from an FTA or GSP Plus scheme would face roughly a 12% tariff.
To qualify for the EU’s Generalized Scheme of Preferences Plus (GSP Plus), a country must ratify 32 international conventions, with the four key areas covering good governance, human rights, labor rights, and environmental protection presenting the most stringent criteria. Bangladesh has signed most of these conventions, but fulfilling the conditions of four to five remain challenging. In light of this, an FTA could prove more advantageous for the country.
Nevertheless, even with GSP Plus, Bangladesh’s garment sector, the backbone of its exports, may not receive full benefits. The EU’s safeguard clause limits the GSP advantages for sectors that exceed a 6% share of the market. Bangladesh’s garment industry already accounts for more than 21% of its export market, which may restrict GSP Plus gains for that sector.
