On January 27, 2026, India and the European Union concluded a historic free commerce settlement (FTA). The deal, designed to slash tariffs throughout most items and deepen cooperation in providers, sustainability, and provide chains, was described by European Fee President Ursula von der Leyen because the “mom of all offers.” For Bangladesh, nevertheless, this pact alerts a looming structural disaster. Bangladesh’s main export market is turning into considerably extra aggressive on the exact second Dhaka is navigating its precarious post-Least Developed Nation (LDC) transition.
Whereas the settlement nonetheless requires authorized scrubbing, translation, and formal ratification, the strategic path is simple: the EU is getting ready to deal with India as its most popular financial companion in South Asia. The deal liberalizes commerce protection as much as 99.3 p.c for the EU and 96.6 p.c for India. Critically, the EU will take away tariffs on 90 p.c of Indian items upon the deal’s entry into drive, rising to 93 p.c inside seven years.
For Bangladesh, probably the most consequential particulars are sectoral. The FTA reduces EU tariffs on Indian textiles and attire – which beforehand confronted duties between 9 and 12 p.c – to zero. Related reductions apply to leather-based and footwear, which confronted as much as 17 p.c tariffs. This successfully erodes the tariff cushion Bangladesh has lengthy loved as an LDC, permitting India, an enormous regional competitor with a vertically built-in “cotton-to-garment” provide chain, to compete on a stage taking part in subject.
Bangladesh should now put together for imminent commerce diversion in a market the place it has deep publicity. The EU is Dhaka’s largest buying and selling companion, practically all of it in textiles and attire. In 2024, the sector accounted for practically 94 p.c of all EU imports from Bangladesh. The EU absorbed roughly 44 p.c of Bangladesh’s whole exports within the final fiscal 12 months.
With bilateral items commerce valued at over 22 billion euros and Bangladesh operating a considerable surplus, any shift in EU sourcing patterns will reverberate by Dhaka’s overseas change earnings, industrial stability, and employment. Briefly, the EU-India FTA is a direct risk to the bedrock of the Bangladeshi financial system.
Desire erosion has all the time been a long-term concern, however the EU-India FTA compresses the timeline. Bangladesh’s present benefit depends on duty-free and quota-free entry beneath the “All the pieces However Arms” (EBA) scheme. Following its LDC commencement scheduled for 2026, Dhaka will profit from a window that successfully expires in November 2029. After this level, Bangladesh should safe GSP+ eligibility or a separate bilateral association to keep away from a “tariff cliff,” the place duties on attire may snap again to roughly 12 p.c. If India achieves zero-tariff standing whereas Bangladesh faces a double-digit levy, the aggressive drawback can be an existential risk for a lot of producers.
Even earlier than 2029, India’s improved tariff place will alter purchaser habits. Fundamental attire, which is very price-sensitive and simply shifted, will possible see the primary strain. EU manufacturers can now diversify orders to India and not using a tariff premium, leveraging India’s home uncooked materials base to cut back lead occasions and provide chain dangers. Moreover, the FTA’s provisions on regulatory predictability and commerce facilitation might encourage EU companies to put their “China+1” capability expansions in India reasonably than Bangladesh.
This doesn’t imply Bangladesh is destined to lose its EU market share, however Dhaka can not depend on legacy preferences to maintain its place. It’ll want an lively, multipronged technique. The fast crucial is to deal with 2029 as a tough planning horizon, prioritizing GSP+ readiness by assembly the EU’s 32 worldwide conventions on labor rights, human rights, and environmental safety.
The timing is definitely opportune for diplomacy. On January 8, simply weeks earlier than the EU-India deal was finalized, Bangladesh and the EU concluded the fifth spherical of negotiations for their very own Complete Partnership and Cooperation Settlement (PCA). This PCA will function the authorized and political basis for a strategic partnership, overlaying commerce, funding, and sustainable growth. Dhaka should use the momentum of the PCA to safe a sturdy commerce framework that may survive the post-2029 setting.
Competitiveness should additionally shift towards non-price components. If the tariff hole narrows, consumers will reward velocity to market, product complexity, and dependable traceability. Bangladesh should transfer past the “quick vogue” fundamentals which are simply commoditized and as an alternative spend money on design, man-made fiber (MMF) merchandise, and high-end manufacturing. The EU-India deal alerts the place European commerce coverage is heading: towards sustainability provisions and tighter monitoring of requirements. Exporters who can show their inexperienced credentials will discover a extra steady foothold – and Bangladesh already leads the world in LEED-certified inexperienced garment factories.
The EU-India FTA in the end alerts a brand new South Asia–Europe commerce hierarchy. Bangladesh constructed an “export miracle” on the again of preferential entry and industrial self-discipline. The following part of its financial story can be outlined by its capability to compete with out these crutches in opposition to a neighbor that has simply secured its personal preferential freeway to Europe. Bangladesh nonetheless has time to arrange, however the central message from the EU-India settlement is that the window is open now and it’ll not keep open for lengthy.
