Corporate GovernanceThe 'mother of all deals' between India and the EU wipes out the 9–12% tariff cushion Bangladesh has relied on for decades. With LDC graduation also coming in November 2026, the tariff clock is ticking on two fronts simultaneously.
On January 27, 2026, India and the European Union concluded a comprehensive Free Trade Agreement dubbed the ‘mother of all deals.’ The pact eliminates duties on more than 99% of Indian exports to the EU — including apparel and textiles, which previously faced tariffs of 9–12%, and leather and footwear, which faced up to 17%.
For Bangladesh, the implications are severe. Bangladeshi garments entered the EU duty-free under the Everything But Arms scheme for least-developed countries, while Indian goods faced those 9–12% tariffs. That margin — a structural price advantage — is now gone. India has a vertically integrated ‘cotton-to-garment’ supply chain that Bangladesh cannot match. Bangladesh imports over 85% of its raw materials.
The timing compounds the damage. Bangladesh graduates from LDC status in November 2026. During a three-year transition period, duty-free access continues. But from November 2029, if Bangladesh has not secured GSP+ eligibility or a bilateral arrangement, tariffs on Bangladeshi apparel could snap back to approximately 12% — exactly when India pays zero. Modelling by RAPID estimates garment export losses of over $5.7 billion in that scenario, and a 36.5% total export decline under GTAP simulation.
Trade analysts are clear: the response must go beyond tariffs. EU due diligence laws, mandatory sustainability disclosures, CBAM carbon pricing, and the Digital Product Passport create a multi-layered compliance environment. A Bangladesh that can demonstrate ESG credibility — environmental performance, social standards, transparent governance — has a differentiating argument even at tariff parity. Without that, price competition alone against India and Vietnam will be very difficult to win.
THE TARIFF GAP — BEFORE AND AFTER
| Country / Scenario | EU Tariff on Garments | Status |
| Bangladesh — now (EBA scheme) | 0% | Active until Nov 2029 |
| Bangladesh — post-2029 if no GSP+ | ~12% | Cliff edge risk |
| India — pre-FTA (MFN tariff) | 9–12% | Now eliminated |
| India — post-FTA | 0% | Permanent |
PROJECTED EXPORT IMPACT — RAPID & GTAP MODELLING
| Export loss — LDC prefs retained $190M garment decline from India FTA alone | Export loss — post-graduation, no GSP+ $5.7B+ combined impact of FTA + LDC loss | GTAP export decline scenario 36.5% total exports if facing MFN vs India at 0% | EU share of Bangladesh exports ~50% nearly all in textiles & apparel |
Corporate Governance
Corporate Governance
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