Dhaka has secured 19% lower tariffs under the US-Bangladesh trade deal signed on Monday, which exempts textiles and garments made using raw materials imported from the US.
Muhammad Yunus, the chief adviser leading Bangladesh’s interim government, said Washington DC had “committed to setting up a mechanism for certain textile and apparel goods from Bangladesh using US-made cotton and man-made fibers to achieve zero reciprocity tariffs in the US market”.
US-Bangladesh Trade Agreement: Highlights
- Washington agrees to create a mechanism for zero reciprocal tariffs.
- Bangladesh will reduce some tariffs over several years.
- Bangladesh will reduce non-tariff barriers to US goods.
- Bangladesh has promised to buy US energy worth $15 billion.
- Biman Bangladesh Airlines will buy at least 14 Boeing jets
The White House said Bangladesh has agreed to provide significant preferential market access for US industrial goods and agricultural products, including medical devices, machinery, cars and automotive components, chemicals, soy products and dairy goods, beef, poultry, tree nuts and fruits.
Bangladesh will also reduce non-tariff barriers by accepting US vehicle safety and emissions standards, recognizing US Food and Drug Administration certifications and removing import restrictions on remanufactured goods.
The nations also noted recent and upcoming commercial deals, including aircraft purchases, approximately $3.5 billion of U.S. agricultural products and an estimated $15 billion in U.S. energy purchases over 15 years.
According to the 32-page text of the US-Bangladesh agreement released by the Office of the US Trade Representative, Biman Bangladesh Airlines intends to purchase 14 Boeing aircraft with options to purchase additional. The airline first announced the Boeing order last July as negotiations were underway.
Bangladesh will also buy unspecified quantities of US military equipment and limit purchases from certain countries.
Bangladesh also promised to uphold internationally recognized labor rights and strengthen environmental protection.
Yunus said the agreement comes after nine months of negotiations that began in April last year. The South Asian nation in August cut US tariffs on its exports to 20%, lower than the 37% initially proposed by Washington, providing much-needed relief to the country’s apparel exporters.
Bangladesh’s first-mover advantage
US Trade Representative Jamieson Greer said Bangladesh is the first country in South Asia to conclude a reciprocal trade agreement with the US, which is “a meaningful step towards opening markets, removing trade barriers, and creating new opportunities for US exporters”.
The readymade garment sector is the backbone of Bangladesh’s economy, accounting for more than 80% of total export earnings, employing about 4 million workers and contributing about 10% to GDP.
According to the tariff schedule released by the USTR, Bangladesh will see high tariffs on many agricultural and food products such as poultry, pork, seafood, rice, corn and grains reduced to zero if the agreement comes into force.
Other tariffs initially fall to 50% and gradually reduce to zero over five or 10 years, depending on imports. It will take a decade for the current 53.6% duty on almonds to be reduced to zero and five years for the 53.6% duty on four-stroke auto rickshaw engines to be completely phased out.
Most US tariffs are a flat 19%, but Bangladesh-made pharma ingredients and aircraft parts are allowed duty-free, which is in line with practice for other countries that have signed tariff-reducing trade deals with President Donald Trump’s administration.
