U.S.-Bangladesh trade agreement a cause of concern for Indian apparel exporters

The U.S.-Bangladesh Agreement on Reciprocal Trade has led to concerns among Indian textile and apparel exporters who were looking forward for a competitive advantage over Bangladesh with the 19% tariff for Indian goods in the U.S. because of the interim trade deal between India and America.

According to the U.S.-Bangladesh Agreement on Reciprocal Trade, “The United States commits to establish a mechanism that will allow for certain textile and apparel goods from Bangladesh to receive zero reciprocal tariff rate. This mechanism will provide that a to-be-specified volume of textile and apparel exports from Bangladesh can enter the United States at this reduced tariff rate, but this volume shall be determined in relation to the quantity of exports of textiles, eg. U.S. produced cotton and MMF textile inputs, from the US.”

India exported $1.47 billion worth cotton yarn (570 million kg) to Bangladesh, which is the biggest destination for Indian yarn, in 2024-2025. It shipped 12-14 lakh bales of cotton to Bangladesh last year. Almost 20% of Bangladesh’s garment exports and 26% of India’s cotton apparel exports are to the U.S.

“I fear that the immediate impact will be on Indian cotton yarn as Bangladesh can buy U.S. cotton and spin at its textile mills,” said Chandrima Chatterjee, secretary general of the Confederation of Indian Textile Industry.

“A Bangladesh exporter can use 10% U.S. cotton and claim that he has used 100% U.S. cotton. How will the U.S. determine traceability of the raw material ? As Bangladesh is very strong in apparels, we may stand to lose,” said K.M. Subramanian, president of the Tiruppur Exporters Association.

The U.S. will see more import of Bangladesh garments that makes both, knitted and woven products. India will lose its competitiveness in 100% cotton products such as T-shirts and tops in women’s wear, said Sanjay K. Jain, chairman of the Indian Chamber of Commerce national expert committee on textiles.

But, there are stakeholders who say the impact may not be much.

The textile mills in Bangladesh are facing a crisis because of electricity issues. Bangladesh should make it competitive to buy cotton from the U.S. and spin the yarn, said a Coimbatore-based garment exporter.

“Bangladesh does not grow cotton or produce manmade fibre. It has to buy MMF yarn or cotton from the US for the reciprocal tariff of 19 % to be waived. But, the MFN rate will continue. The time taken to receive the U.S. cotton and the transport and storage costs should be taken into consideration. Further, not all products can be made from American cotton. So, the product mix should change and supply chain should be realigned in Bangladesh. This will not be an overnight change. It will all take time and we should see how practical it is. This is going back to the quota regime that existed before 2000,” said Siddhartha Rajagopal, executive director of the Cotton Textiles Export Promotion Council.

According to A. Sakthivel, chairman of the AEPC, “There is an Executive Order by the US government issued last April that says that the ad valorem rates of duty applies only on the non-US component of a product, when there is at least 20 % value addition. We will appeal to the Indian government to ask for a provision similar to the one given to Bangladesh for Indian apparel exporters too,” he said.