Bangladesh’s readymade garment (RMG) sector is set to face stronger competition in the EU after the EU and India finalized a free trade agreement granting Indian apparel duty-free access, expected to take effect in 2027. The deal will remove the current 12% tariff on Indian clothing, challenging Bangladesh’s long-standing advantage.
Bangladesh currently exports garments duty-free to the EU under the LDC trade facility, which will end three years after its expected graduation from LDC status in November 2026. Without GSP Plus or a bilateral deal, Bangladeshi exports could face 12.5% tariffs from 2029. Experts warn this could weaken Bangladesh’s competitiveness in Europe, its largest apparel market, which accounted for over $19 billion in exports in FY25.
Industry leaders note India’s advantages in raw materials, skilled labor, and state support will intensify competition, particularly in price-sensitive segments. Analysts say the EU-India deal, coupled with US trade shifts and oversupply in Europe, could squeeze Bangladeshi margins.
Business groups have called the agreement a “wake-up call,” urging Dhaka to secure GSP Plus status or a bilateral FTA to maintain market access and safeguard the country’s export model.
