INDIAN EXPORTERS PERTURBED BY U.S.– BANGLADESH TRADE PACT

News: A new U.S.–Bangladesh Reciprocal Trade Agreement allows zero tariff access to Bangladeshi textile and apparel exports if they use U.S.-origin raw materials, which may undermine India’s competitiveness in the U.S. market.

Importance of textiles

• Labour-intensive sector
• Major source of exports and employment
• Key export markets: U.S. and EU

India vs Bangladesh in garments

• Bangladesh is a strong global apparel exporter
• India expected an advantage because:
  • Proposed U.S. tariff on Bangladesh goods: 19%
  • Proposed tariff on Indian goods: 18%

Indian exporters: Worried

• India exported: $1.47 billion worth of cotton yarn to Bangladesh (2024–25), 570 million kg yarn, 12–14 lakh bales of cotton
• Bangladesh: India’s largest yarn export destination
• Share of exports to U.S: 20% of Bangladesh’s garment exports, 26% of India’s cotton apparel exports

India’s demand for parity

• A U.S. Executive Order (April last year) states: Ad valorem duty applies only to the non-U.S. component
  • Provided there is at least 20% value addition
• Indian exporters’ demand: India should be given a similar provision
  • This would: Reduce effective tariffs, ensure level playing field

Broader implications for India

• Possible decline in: Cotton yarn exports, apparel competitiveness
  • Pressure on: MSMEs, Textile clusters like Tiruppur
• Trade policy lesson: Modern trade agreements increasingly use–>Rules of origin, conditional market access
  • India needs: Proactive trade diplomacy, diversification of markets