Bangladesh eyes EU trade pact

Hafsa Noor

BANGLADESH IS preparing to launch formal negotiations on a Free Trade Agreement (FTA) with the European Union (EU) while stepping up efforts to join a major Asia-Pacific trade bloc, as the south Asian economy seeks to protect exports ahead of its scheduled graduation from the United Nations’ least developed country category.

Bangladesh and the EU have exchanged formal letters agreeing to begin negotiations, Commerce Minister Khandakar Abdul Muktadir said. Formal talks are expected to start next month, with both sides having appointed lead negotiators.

The EU is Bangladesh’s largest export market, making the negotiations particularly important for the country’s garment-dominated economy. Bangladesh currently enjoys duty-free and quota-free access to the EU under the Everything But Arms (EBA) scheme for Least Developed Countries (LDCs). The arrangement excludes arms and ammunition. That preferential access will eventually change after Bangladesh leaves the LDC category, increasing pressure on Dhaka to secure a longer-term trade framework with Brussels.

EU market at the centre of strategy
Bangladesh’s ready-made garment industry accounts for the bulk of its merchandise exports and is heavily dependent on European consumers. An FTA with the EU could help preserve Bangladesh’s access to overseas markets while providing a broader framework for trade and investment after Bangladesh relinquishes its LDC status.

The two sides also moved closer this year by initialling a Partnership and Co-operation Agreement covering areas including trade, investment and sustainable development. The EU FTA talks are therefore expected to form part of a broader effort to deepen economic ties between Dhaka and Brussels.

RCEP bid gains momentum
At the same time, Bangladesh is pursuing membership of the Regional Comprehensive Economic Partnership (RCEP), a trade agreement linking the ten ASEAN members with Australia, China, Japan, South Korea and New Zealand.

Bangladesh applied to join RCEP in 2024 and has been working to meet the bloc’s accession requirements.

A Bangladeshi delegation led by Commerce Secretary Md Ataur Rahman Khan recently sought New Zealand’s backing for the application during meetings in Wellington. Dhaka said it had submitted the required questionnaire and was undertaking reforms to bring its trade regime closer to RCEP standards. The reforms cover areas including tariffs on industrial inputs and machinery, telecommunications, financial and logistics services, competition policy, intellectual property and data protection.

LDC graduation raises trade risks
Bangladesh is scheduled to graduate from the LDC category in November 2026. The Government has asked for the transition period to be extended until November 2029, citing global economic disruptions and domestic challenges. Graduation would mark a significant milestone in Bangladesh’s economic development, but it could also reduce access to trade preferences that have supported its export growth.

The potential loss of preferential access to the EU is a particular concern given the importance of the European market to Bangladesh’s garment industry. Securing alternative or longer-term market access has consequently become a central element of Dhaka’s post-LDC trade strategy.

Trade deficit adds to pressure
The push to expand market access comes as Bangladesh faces a growing trade imbalance. The country’s trade deficit rose to $27.28 billion in the 2025-26 fiscal year, according to Bangladesh Bank data reported in early August. Officials hope stronger access to major markets will help boost exports, attract investment and reduce the economy’s reliance on a narrow range of products and destinations. An EU agreement would reinforce Bangladesh’s position in its largest export market, while RCEP membership could provide greater access to Asian markets and regional production networks.

Reforms will be key
Neither initiative is likely to be straightforward. Bangladesh will have to negotiate issues ranging from tariffs and services to investment, intellectual property, labour rights and environmental standards. RCEP accession would also require further regulatory and policy reforms, potentially increasing pressure on domestic industries and government agencies to adapt to more competitive trading conditions.

For Dhaka, the challenge is to secure market access while preparing businesses for a trading environment in which the preferential treatment associated with LDC status is gradually reduced. The twin push toward Europe and Asia reflects a broader shift in Bangladesh’s trade policy: protecting existing export markets while building new links to major global supply chains. With the end of LDC status approaching, the Government has limited time to turn those ambitions into concrete trade arrangements.