AS THE global trading system faces rising uncertainty, from tariff hikes to shifting geopolitical alliances, Bangladesh stands at a critical crossroads. As the country is quickly approaching graduation from a least developed country, rethinking our current trade strategy is necessary. We need to move beyond short-term, quick fixes and embrace a more holistic trade and sustainable development strategy 鈥� one that creates decent work, enhances resilience to external shocks, and ensures greater equity and climate resilience.
Before the World War II, trade was primarily a matter for nation-states. During the 1930s, state-led protectionist trade policies, such as tariff hikes and currency devaluations, plagued the global economy and are partly to blame for triggering the Great Depression and the World War II.
After the World War II, the USA emerged as the world鈥檚 major economic and political power and played a key role in designing a liberal trade and economic structure. The rule-based liberal trading system allowed trading in goods but did not allow labour migration. As a result, newly independent developing countries had to absorb their unskilled workers and face serious competition in global trade with industrialised countries. With no manufacturing capacity, these newly independent countries largely relied on exporting raw materials, agricultural products, and other low-value commodities that were subject to price fluctuations in global markets. Compare their route to development with European nations that benefitted from the open labour migration policy of the US, which absorbed their excess labour and used slave labour and raw materials from colonial countries and built their economies through growing exports to their colonies. Despite the premature exposure of newly independent countries to the liberalised market system and its structural disadvantages, Bangladesh successfully charted its path to industrialisation. By leveraging its abundant supply of low-skilled labour, Bangladesh was able to become the world鈥檚 second-largest garment exporter after China. The garment sector, powered by preferential access to foreign markets, created millions of jobs and lifted many households out of poverty.
However, with the recent shift toward protectionist trade policies and potential tariff hikes, Bangladesh must carefully chart the next phase of its trade-based economic development path. It is time to reassess our over-reliance on a narrow export base 鈥撎齩ne dominated by low-value, labour-intensive garments and a handful of export destinations. Our export profile reveals a pattern common to all LDCs: low manufacturing capacity, limited product diversification, and dependence on labour-intensive manufactured goods. Due to its dependence on a limited number of products and export destinations, Bangladesh鈥檚 exports remain highly vulnerable to external shocks. Rather than presenting quick fixes and easy solutions, a forward-looking liberal trade strategy should begin with tough questions: How can we absorb these external shocks? How can we expand what and where we export? How should we address the pressing economic (e.g., creating decent work for large numbers of unemployed youth) and social concerns (e.g., assisting workers losing jobs in affected exporting sectors)? Finally, what should be our long-term strategy for trade and economic development?
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Trade diversification and alternative export markets听
TRADE diversification helps to absorb sudden external shocks and reduces vulnerabilities caused by a narrow export base. We must broaden our product range, identify our competitive advantages in sectors beyond garments, add more value-added products to our export list, and actively pursue alternative export destinations. To secure market access arrangements that support our sustainable development aspirations and expand our trading options, proactive trade diplomacy 鈥� particularly through our embassies and consulates 鈥� will be key. A careful reevaluation of existing bilateral and regional trade and economic arrangements, which include multidimensional issues (trade, human rights, social and environmental concerns, development cooperation, climate change, and security), is urgently needed. This will help determine what kinds of technical cooperation and innovation assistance Bangladesh can avail, and how trading partners can support our export diversification and shock absorption plans. Engaging with both existing and prospective trade partners should be a top priority for our trade, economic development, and foreign policy agenda.
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Export development assistance听
RECENTLY, the central bank of Bangladesh reduced the size of its Export Development Fund to $2.51 billion following evidence that some exporters were using it to syphon money abroad. While stricter action against corruption and money laundering is an absolute necessity, we must devise mechanisms to support our exporters in diversifying products and investing in higher value-added goods. Bangladesh needs a robust export development institution 鈥� one that not only offers funding (loans and guarantees) but also expert guidance on managing global trade risks, potential insurance solutions, and emerging opportunities.
A dedicated export development institution could also assist entrepreneurs in exploring new sectors and explore the potential of service trade. Unlike goods, most cross-border services are not subject to tariffs. By training the youth workforce, Bangladesh can expand into software and artificial intelligence products and services, financial services, the creative economy, etc., and create decent jobs that would help close the trade deficit.
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Preparing for LDC graduation听
A KEY reminder is that Bangladesh will graduate from LDC status by 2026, which will result in the loss of duty-free access to the EU unless new agreements are secured. This could make Bangladeshi garments more expensive and less competitive. Here, again, our embassies and consulates in the EU should lead proactive trade diplomacy to ensure that Bangladesh鈥檚 sustainable development goals are protected.
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Increased social and environmental compliance
TO REMAIN competitive in the EU and enhance bargaining capacity with global brands, our garment exporters should adopt enhanced social and environmental compliance in line with the United Nations Guiding Principles on Business and Human Rights, 2011. Vietnam has already taken steps in this direction by adopting human rights due diligence measures for some of its businesses. Bangladesh can replicate similar compliance models for its garment industry. With only a marginal rise in production costs, such measures can improve labour rights, increase market access, strengthen supply chains, and build long-term credibility.
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Holistic approach to trade, labour and economic policy-making听
FINALLY, trade policy cannot and does not operate in a vacuum. It must be embedded in a broader sustainable development agenda that includes social equity, climate resilience, and technological advancement. Faced with potential trade restrictions, Bangladesh urgently needs to assess both short-term and long-term impacts on labour, design mechanisms to absorb external shocks, provide technical and financial assistance to affected exporters, and retrain workers to transition into other sectors.
For too long, Bangladesh鈥檚 trade strategy has relied on low-skilled labour and low production costs. Development economists, including Nobel laureate economist Joseph Stiglitz, have argued that firms cannot sustain competitiveness by focusing solely on reducing production costs, as newer low-cost producers inevitably emerge. These economists have shown that to compete, exporters of labour-intensive products need to resort to continually lowering wages or informalising production. As a result, workers often fall into informal sectors, where low skills and low productivity trap them in continuing poverty.
We must realise that depending on low wages for longer periods of time is unsustainable and such an economic growth-orientated trade strategy fails to fairly distribute the benefits of trade to those who earned these. Historically, all economically successful countries have achieved technological advancement and ensured lesser income inequality through a mixture of labour, economic and environmental policies before embarking upon export-led growth. To remain competitive in the global market and build a resilient economy, Bangladesh must invest in innovation, promote decent work, retrain its workforce, and make arrangements to address the social and environmental impacts of trade. A long-term trade strategy that is not only pro-growth but also pro-people and planet can help secure Bangladesh鈥檚 economic future and uplift the next generation.
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Dr Zobaida Khan is a barrister and solicitor.
