The interim government of Bangladesh, headed by Muhammad Yunus, has finalized two landmark trade agreements with global economic powers, the United States and Japan, just days before the national elections scheduled for February 12. These strategic moves are designed to provide a critical safety net for the country's struggling economy and protect its vital garment industry. The timing of these deals is significant, as Bangladesh seeks to mitigate the impact of recent trade concessions granted by the US to India, which had placed Bangladeshi textile exporters at a competitive disadvantage.
Historic Economic Partnership Agreement With Japan
Last week, Bangladesh signed an Economic Partnership Agreement (EPA) with Japan, marking the first time the nation has entered into such a comprehensive trade pact with any country. 9% of Bangladesh's tariff lines. This includes ready-made garments, which constitute the bulk of Bangladesh's export earnings. According to trade analysts, the primary objective of this EPA is to invite Japanese investment into Bangladesh's automotive and manufacturing sectors. The government aims to encourage Japanese entrepreneurs to invest directly in local vehicle assembly, potentially transforming the domestic automotive industry.
Reciprocal Tariff Reductions In US Trade Deal
Following the deal with Japan, Bangladesh is set to sign a significant trade agreement with the United States on Monday. Under the proposed terms, the US will waive tariffs on garment items exported to American markets if they're manufactured using US-sourced raw materials, such as cotton and yarn. Currently, garments account for nearly 95% of Bangladesh's exports to the US. The deal stipulates that if a product contains 70% US-origin material by value, it will be exempt from the 20% reciprocal tariff imposed last year. This is expected to provide substantial relief to the garment sector, ensuring that Bangladeshi products remain price-competitive in the North American market.
Strategic Shift Ahead Of LDC Graduation
Bangladesh is scheduled to graduate from the 'Least Developed Country' (LDC) category in November this year. This transition will result in the loss of several international trade preferences and duty-free benefits. To prepare for this, the Yunus administration has fast-tracked these agreements to secure favorable terms before the graduation deadline. As part of the broader strategy to balance trade with the US, Bangladesh has committed to purchasing Boeing aircraft, increased quantities of cotton, soybeans, and liquefied petroleum gas. 5 million tons of wheat from the US over five years, with approximately 660,000 tons already procured.
Analysis Of Political And Economic Implications
Trade experts suggest that the success of these agreements will largely depend on the political stability following the February 12 elections. While the interim government appears to have strong backing from Washington, the long-term implementation will be overseen by the succeeding administration, while analysts note that the reduction of the additive reciprocal tariff from 37% to 20% by the Trump administration, followed by these new concessions, indicates a strategic alignment between Dhaka and the West. This alignment is seen as a move to diversify Bangladesh's economic dependencies and strengthen its position as a reliable manufacturing hub in South Asia, especially in the face of rising competition from regional neighbors.