US trade deal to cut tariffs, open duty-free RMG access

Staff Reporter :

Bangladesh is poised to secure significant trade concessions from the United States, including a reduction in reciprocal tariffs and duty-free access for garments manufactured with American cotton, under a bilateral trade agreement scheduled to be signed in Washington on 9 February.

Commerce Secretary Mahbubur Rahman confirmed the development, saying the deal could provide a major boost to the country’s readymade garment (RMG) sector, provided Bangladesh fulfills a set of agreed conditions. Under the proposed agreement, garments produced in Bangladesh using US cotton are expected to enter the American market without duties.

In addition, Bangla-desh’s reciprocal tariff rate is set to be lowered from the current 20 percent. Although the final rate has not yet been disclosed, senior commerce ministry officials indicated it could be reduced to around 15 percent.

The revised tariff structure will be officially announced once the agreement is signed.

To qualify for these benefits, Bangladesh has committed to several policy and trade measure include boosting imports from the US, avoiding e-commerce tariffs, withdrawing fisheries export subsidies, strengthening IPR compliance, and backing US-led WTO reforms.

The commerce secretary also noted that Bangladesh will sign an Economic Partnership Agreement (EPA) with Japan in Tokyo on 6 June, ahead of finalising the US trade deal.

Commerce ministry officials explained that under existing WTO rules, goods and services traded through e-commerce are currently exempt from tariffs.

However, this arrangement is due to expire after the WTO’s 14th Ministerial Conference, set to be held in Yaoundé, Cameroon, from 26 to 29 March.

The United States has proposed making the moratorium on e-commerce tariffs permanent, which would prevent countries from imposing duties even on digitally delivered services. WTO member states are expected to vote on the proposal during the conference.

Trade experts warned that a permanent tariff exemption on e-commerce could lead to revenue losses for Bangladesh, which currently applies selective duties on certain e-commerce goods and services.

Former Bangladesh Trade and Tariff Commission member Mostafa Abid Khan said, however, that the government would still retain the authority to set annual spending caps on e-commerce purchases by individuals or companies.

Former WTO Cell director general Md Hafizur Rahman added that the US conditions would not affect other domestic e-commerce laws or regulatory frameworks.

On intellectual property issues, a commerce ministry official said Bangladesh would need to amend parts of its patent laws to comply with stricter US requirements, reducing the flexibility currently allowed under existing legislation.

Bangladesh’s garment exports to the US have faced long-standing hurdles. Although the country is entitled to duty-free treatment as a least-developed country under WTO rules, the US suspended GSP benefits for garments following the 2013 Rana Plaza disaster.

Efforts to reinstate those benefits did not succeed. Industry leaders now view the new arrangement as a more realistic pathway.

BKMEA leader Mohammad Hatem said Bangladesh has already increased imports of US cotton and that duty-free access for garments made with American cotton would be mutually beneficial.

The United States remains Bangladesh’s largest export market. In the last fiscal year, exports to the US reached $8.69 billion, largely driven by woven and knit garments.

During the same period, Bangladesh imported $346 million worth of US cotton about 10 percent of its total cotton imports underscoring the deepening trade ties that underpin the new agreement.