The map of global trade is changing once again. After long negotiations between the European Union (EU) and India, a Free Trade Agreement (FTA) has finally been concluded. This agreement will not only reshape the relationship between the two economies, but it will also create a major competitive earthquake in South Asia’s ready-made garment industry. In this context, Bangladesh-- whose economy is heavily dependent on the garment sector-- is feeling the greatest pressure.
In this new reality, a major question has emerged: will Bangladesh’s “low-cost competitive advantage” still survive?
1. The Main Change in the Agreement: A New Competition with Zero TariffsUnder the new EU-India FTA, Indian products--especially textiles and garments--will gradually receive zero-tariff access to the European market. Previously, Indian products faced tariffs ranging from 8-12 percent, but these tariffs will now be eliminated or significantly reduced.
As a result of this change, India is becoming a direct competitor to Bangladesh in the European market. For many years, Bangladesh has maintained a competitive position by utilizing zero-tariff benefits (LDC facilities) in Europe. However, this advantage is not permanent--due to Bangladesh’s LDC graduation and future policy changes, these benefits will gradually diminish.
India is now entering the very space where Bangladesh had long enjoyed almost exclusive advantages.
2. A “Preference Shock” for BangladeshAccording to analysts, this agreement has created a “preference shock” for Bangladesh. Since Europe is now offering similar conditions to India, Bangladesh’s previous tariff advantage margin of 9-12 percent is effectively disappearing.
Europe is Bangladesh’s largest market, accounting for more than half of its total exports.
Now, if India can supply products at the same or even lower prices, the biggest question is: why would European buyers continue to prioritize Bangladesh?
3. The New Equation of Competition: Not Just Price, but Efficiency MattersUntil now, Bangladesh’s competitiveness has mainly depended on low labor costs and tariff advantages. But in the new situation, competition will become multidimensional, such as:
• Production efficiency
• Technological capability
• Sustainability compliance
• Stability of the supply chain
India is making major investments in these sectors and aims to increase its textile exports to Europe several times over. According to some analyses, India could raise its exports to Europe to 30-40 billion dollars.
If this happens, Bangladesh will come under direct pressure.
4. Where Does Bangladesh’s Weakness Lie?Bangladesh’s garment industry still largely depends on a “low value-low margin” model. It remains behind in advanced technology, design innovation, and branding.
In addition:
• Production costs are gradually increasing
• Gas and electricity shortages are worsening
• Logistics limitations remain
• European pressure regarding labor and environmental standards is increasing
Together, these factors are reducing Bangladesh’s competitive advantage. Meanwhile, India is expanding large-scale manufacturing and value-added production, which could place it in a much stronger position in the European market.
5. Will Bangladesh Lose the Market?The straightforward answer is: there is no risk of losing the entire market, but the risk of losing market share is very real.
Bangladesh still remains strong in several areas:
• Large-volume production at low cost
• Established supply chains
• Long-term dependence of European brands
However, the problem is that these advantages are not permanent. If India can supply products of the same quality at lower prices, Bangladesh will have to prove its position all over again.
6. Policy Challenges and Future StepsFor Bangladesh, the most urgent need now is “transformation.” It is not enough to simply increase production; value addition is essential.
Some important measures are necessary, such as:
• Smart textiles and automation
• Design and brand development
• Expansion into new markets (beyond the EU)
• Green production (green compliance)
• Skilled workforce development
Experts believe that if Bangladesh fails to make this transformation, then not only India but also Vietnam and other countries will become major threats in the future.
7. The Broader Geopolitical RealityThis agreement is not only economic but also geopolitical. Europe now wants to diversify its supply chain. By reducing dependence on China, India is being developed as an alternative power.
In this new equation, Bangladesh has become a “middle pressure zone,” where the decisions of major powers are directly impacting the economy.
The EU-India trade agreement is not an immediate disaster for Bangladesh, but it is a long-term warning signal. It clearly shows that no industry can survive solely by depending on tariff advantages.
If Bangladesh does not immediately transform its production structure, technology, and market strategy, competition in the European market will become even more difficult in the future. Now is the time for decision--will Bangladesh remain stuck in the old model, or will it prepare itself for the new global competition?
The author is a writer, journalist, and political analyst
