Summary of Key Points
In February 2026, the United States and Bangladesh signed a Reciprocal Trade Agreement. For Bangladesh, this was a negotiation aimed at "avoiding greater losses": the initial tariff proposed by the US was 37%, which was eventually reduced to 19%, and the agreement also provided a zero-tariff exemption for garments made from US cotton. However, the agreement comes with numerous unequal obligations (Bangladesh is required to fulfill 131 obligations, while the US only has to fulfill 6), which could affect Bangladesh's relations with India, the European Union (EU), and China. For Bangladesh to truly benefit from the agreement, it will need parliamentary oversight, industrial adjustment, and diplomatic coordination to transform this potentially disadvantageous agreement into a platform for long-term development.
I. Why Did Bangladesh Have to Sign? – A Reluctant Choice to Protect Its Economy
Bangladesh's economy is largely dependent on the garment industry. In the 2024-2025 fiscal year, garment exports accounted for 82% of its total exports, directly employing 4 million people, mostly rural women. The US is its second-largest market, accounting for 19% of its garment exports. If the US had imposed a 37% tariff, Bangladeshi garments would have lost their competitiveness in the US market – orders would have gone to Vietnam and Cambodia, factories would have closed, workers would have lost their jobs, and the country's foreign exchange earnings and import capacity would have collapsed. Therefore, signing the agreement was not about "getting a bargain" but about "surviving."
II. Is the Zero-Tariff Exemption a True Benefit or a Trap? – Using US Cotton to Gain Market Competitiveness
The most notable aspect of the agreement is the "zero-tariff exemption": garments made from US-produced cotton or synthetic fibers can enter the US market without tariffs. This is a significant advantage for Bangladesh, as zero tariffs would allow its products to be sold more cheaply in the US, putting them on par with those from Vietnam and Cambodia (whose tariffs have also been reduced to around 19%).
However, this means Bangladesh must change its raw material procurement habits. It previously relied almost entirely on imported cotton, with India being a major supplier (accounting for 23% of Bangladesh's cotton imports in 2024). Now, to qualify for the zero-tariff exemption, it must buy US cotton. Although US cotton is 5%-10% more expensive than Indian cotton, the higher shipping costs and price fluctuations can be mitigated by the tariff benefits, and the stability of the supply chain (due to the large volumes and consistent quality of US cotton) can also be advantageous.
III. How Unfair Are the Agreement's Terms? – Bangladesh Must Fulfill 131 Obligations, While the US Only Has to Fulfill 6
Many criticize the agreement as unfair, as Bangladesh is required to fulfill 131 obligations (such as labor standards, intellectual property rights, and digital trade rules), while the US only commits to 6. However, it is important to consider the following:
- Some of these terms are common templates used in agreements between the US and other countries (such as suspending tariffs on electronic transmissions and recognizing US product standards) and are not specifically targeted at Bangladesh.
- The truly stringent obligations are those that prevent Bangladesh from signing agreements with "non-market economy countries" (such as China) and allow the US to suspend the tariff benefits at any time.
These terms do impose constraints on Bangladesh, but they are not insurmountable. Bangladesh can use parliamentary oversight to ensure compliance, for example, by establishing a special committee to review the agreement, clarify its key provisions, and ensure that the US does not exploit these terms arbitrarily.
IV. Which Countries Will Be Affected by the Agreement? – Impact on India's Cotton Industry and EU/China Relations
1. India: With Bangladesh turning to US cotton, India's cotton exports to Bangladesh (worth $2.7 billion in 2024) will be impacted, and Indian textile companies' stock prices have already declined. Bangladesh needs to communicate with India, explaining that this is part of its economic strategy and not a direct challenge to India.
2. EU: Bangladesh is applying for EU GSP+ tariff preferences (special treatment for poor countries), but there are conflicts between US and EU rules. For example, the US considers certain product names to be "generic," while the EU wants to protect them as "geographical indications"; the US supports free cross-border data flow, while the EU emphasizes data privacy. Bangladesh must coordinate its policies to avoid offending the EU.
3. China: China is a supplier of equipment, infrastructure financing, and intermediate goods to Bangladesh. The agreement's restrictions on cooperation with non-market economy countries may affect Bangladeshi-Chinese relations. Bangladesh needs to clarify that signing the agreement with the US does not undermine its cooperation with China.
V. How Can Bangladesh Turn This Around? – Three Approaches to Transform the Agreement into a Development Opportunity
To turn the agreement into a development opportunity, Bangladesh needs to take the following steps:
1. Quickly Implement the Zero-Tariff Exemption: Work with the garment industry to establish a timeline for purchasing US cotton and set up an certification system to enable companies to benefit from the zero-tariff exemption as soon as possible, gaining a competitive advantage over rivals.
2. Parliamentary Oversight: Establish a committee to review the agreement, conduct public debates, and clarify responsibilities to ensure that the agreement is backed by democratic processes and not misused by the executive branch.
3. Diplomatic Coordination: Communicate with the EU to emphasize that the US-Bangladesh agreement is supplementary to, not a replacement for, GSP+. Explain the changes in cotton procurement to India and maintain a friendly relationship with China, ensuring that cooperation with China remains unchanged.
4. Promote Domestic Reforms: Use the agreement's labor standards and intellectual property requirements as drivers for domestic reforms (such as improving worker conditions and strengthening intellectual property protection). This will not only meet US requirements but also attract more international investment.
5. Collaborate with Other Countries: Join other countries that have similar agreements with the US to negotiate for more equitable terms and move from being a "rule recipient" to a "rule participant."
In summary, this agreement is neither a "victory" nor a "disaster." The key lies in whether Bangladesh can actively manage it to turn short-term tariff benefits into long-term development opportunities. If done well, it can not only preserve its garment industry but also drive domestic reforms and open up new avenues for international cooperation.