IN THE grand narrative of Bangladesh鈥檚 rise from a war-torn country to a development model for the global south, trade has always played a pivotal role. With exports crossing the $60 billion mark in the 2023 financial year, up from just $6.5 billion two decades ago, Bangladesh has showed how the strategic use of comparative advantage and an export-oriented industrial policy can lift millions out of poverty. Yet, the very scaffolding that built this success is now under threat, not from domestic mismanagement or global market collapse but from shifting and increasingly coercive demands by Bangladesh鈥檚 largest trade partners, most notably the United States.
In the latest bilateral negotiations, the US Trade Representative introduced a critical change: the replacement of Bangladesh鈥檚 existing domestic value-added criteria with a regional value content requirement for tariff concessions. This may appear to be a mere recalibration of trade accounting. But in economic terms, it is a tectonic shift, which could destabilise Bangladesh鈥檚 export foundation, severely affect its small and medium-sized enterprises and compromise national economic sovereignty.
As of the 2023 financial year, the apparel sector sector alone accounted for 84.6 per cent of the total export earnings, fetching $47.39 billion, according to the Export Promotion Bureau. The industry employs about 4.4 million workers, of whom more than 65 per cent are women, making it not only an economic driver but a vector for social change. About 95 per cent of apparel factories are locally owned and the majority operate as SMEs, with limited access to international capital or diversified sourcing networks.
The proposed regional value content formula, however, would require a significant portion of the production cost, estimated by industry experts to be at least 40鈥�50 per cent, to originate from regional partners, such as ASEAN or South Asian nations, in order for Bangladesh鈥檚 exports to qualify for preferential access to the US market. This shift effectively nullifies the policy where local value addition of 30 per cent was sufficient for duty-free or low-tariff entry.
But here lies the problem. Bangladesh鈥檚 garment supply chain is largely vertically integrated within national borders. According to the Bangladesh Garment Manufacturers and Exporters鈥� Association, only 15 per cent of inputs such as fabrics, dyes or trims are sourced from regional partners. The rest are produced domestically or imported globally, including from China, based on cost-efficiency. Forcing a shift to a regional model would not only increase input costs, estimated to rise by 12鈥�18 per cent because of less competitive regional pricing, but also demand the structural reconfiguration of supply chains that SMEs simply cannot afford.
A recent Centre for Policy Dialogue study highlights the disproportionate burden that this would impose. More than 78 per cent of garment SMEs do not have access to trade financing large enough to support the logistical overhaul required by regional value content compliance. In fact, many operate with working capital cycles of less than 45 days, leaving little room for upstream delays or added coordination with regional subcontractors.
Even worse, this shift threatens to crowd out local firms in favour of transnational manufacturers with regional presence, mainly from India, Vietnam or Singapore, that are better positioned to meet regional value content thresholds. In effect, it encourages outsourcing from Bangladesh to meet US conditions which is not just economically ironic but geopolitically perverse.
The implications of this policy go beyond just trade metrics. They cut into the marrow of national sovereignty. Alongside the regional value content demand, leaked documents suggest that the United States is attempting to embed clauses into the agreement that require Bangladesh to align its trade and foreign policy with Washington鈥檚 so-called 鈥榲alues-based alliance.鈥� In practice, this means imposing targeted restrictions on countries deemed adversarial by the United States, chiefly China, Iran and, possibly even, Russia.
For a country such as Bangladesh, which imports about 48 per cent of its textile raw materials from China and maintains diversified relations for economic survival, such a clause would be strategically suicidal. It would also constitute a de facto renunciation of our long-standing non-aligned foreign policy, which has allowed us to maintain stable relations with both western democracies and eastern powers without becoming anyone鈥檚 satellite.
This is not conjecture. Countries like Kenya, Ghana and Ethiopia have previously experienced fallout from such geopolitical clauses tied to trade. In Ethiopia鈥檚 case, the United States revoked its African Growth and Opportunity Act privileges in 2021 because of its domestic conflict, costing the country more than $100 million in annual export losses and eliminating close to 30,000 textile jobs overnight. Do we want Bangladesh to suffer a similar fate because we refused to antagonise China or refused to toe the US line on Ukraine?
Moreover, the demand is starkly hypocritical. The United States, through the Indo-Pacific Economic Framework, often talks about 鈥榖uilding inclusive and resilient economies.鈥� But, there is nothing inclusive about trade rules that disproportionately harm the global south鈥檚 weakest manufacturers. There is nothing resilient about uprooting well-functioning domestic supply chains in favour of politically curated ones.
And while the United States may argue that regional value content ensures greater regional cooperation, it ignores the developmental asymmetry in South Asia. India, with an economy 10 times Bangladesh鈥檚 and subsidised mega-firms, would naturally benefit from this integration. But for Bangladesh鈥檚 fragile industrial base, this would mean being reduced to an appendage to someone else鈥檚 value chain.
So, what is to be done?
The first imperative is diplomatic clarity. Bangladesh must clearly communicate that while it values its trade relations with the United States, its third-largest export destination accounting for more than $9.75 billion in exports in the 2023 financial year, it cannot, and will not, accept conditions that jeopardise its internal stability and development model. Trade is negotiation, not capitulation.
Second, policymakers must accelerate diversification, both in products and destinations. The over-dependence on apparel and a handful of markets has created a monoculture in our trade portfolio. Non-garment sectors such as pharmaceuticals, which saw a 24.2 per cent export growth in the 2023 financial year, ceramics and IT-enabled services must receive policy priority.
Third, Bangladesh needs to re-invest in trade diplomacy infrastructure. We need more economic attach茅s in foreign missions, more professional trade negotiators trained in WTO frameworks and more public transparency in trade talks. Deals signed in secret, without parliamentary scrutiny or stakeholder input, will always favour the powerful.
Lastly, the global south must consider coordinated resistance to coercive trade practices. Bangladesh should explore forming a bloc with countries such as Vietnam, Sri Lanka and Ethiopia to voice concerns at forums such as the World Trade Organisation and the UN Trade and Development. If the United States can use trade as leverage, why can developing countries not build coalitions to protect their collective interests?
In the final analysis, this is not only about duty-free access to American malls. This is also about development dignity. It is about whether countries such as Bangladesh will be allowed to grow on their own terms or forced to contort themselves to fit the designs of larger powers. It is about whether 鈥榩artnership鈥� still means mutual respect or has been hollowed out into a euphemism for strategic compliance.
Bangladesh鈥檚 rise is no accident. It is the result of difficult decisions, national sacrifices and the tireless efforts of workers, millions of them, who built something from nothing. To allow external actors to now dictate how that economy must evolve, under threat of trade restrictions or ideological alignment, is to dishonour that history.
It is often said that trade opens doors. But, if those doors come with shackles, they are, perhaps, better left closed.
听
HM Nazmul Alam ([email protected]) is an academic, journalist and political analyst.