Context
Recently, the United States and Bangladesh have finalized a landmark Agreement on Reciprocal Trade on February 9, 2026. This pact follows closely on the heels of a similar Indo-US trade framework, signaling a significant shift in Washington’s trade policy toward South Asia by offering Bangladesh competitive tariff advantages that directly impact India’s export landscape.
Key Highlights of the US-Bangladesh Trade Pact (2026)
1. Tariff Structure and Reciprocal Rates
- General Reduction: The US has lowered the reciprocal tariff on Bangladeshi goods to 19% (down from the previous 20% and the original 37%).
- Comparison with India: While India secured a slightly lower general rate of 18% in its recent deal, the Bangladesh pact includes specific “carve-outs” that may offer deeper advantages in certain sectors.
2. The “Zero-Tariff” Textile Clause
- Input-Linked Benefit: The US will provide zero-duty access for a specific volume of Bangladeshi ready-made garments (RMG), provided they are manufactured using US-produced cotton or man-made fibers.
- Strategic Shift: This move is designed to incentivize Bangladesh to shift its raw material sourcing from India (traditionally its largest supplier) to the United States.
3. Market Access for US Goods
- Agricultural Commitment: Bangladesh has pledged to purchase approximately $3.5 billion worth of US agricultural products, including wheat, soy, corn, and notably, cotton.
- Energy Security: The pact includes an agreement for Bangladesh to procure $15 billion worth of US energy products over the next 15 years.
- Industrial Goods: Bangladesh will grant preferential access to US chemicals, medical devices, machinery, and automobiles, while recognizing US FDA standards and motor vehicle safety emissions.
4. Regulatory and Labor Reforms
- Labor Rights: Bangladesh has committed to an 11-point agenda to modernize labor laws, enhance freedom of association, and prohibit forced labor, aimed at eventually regaining GSP (Generalized System of Preferences) benefits.
- Digital Trade: The agreement ensures the free transfer of data across borders and supports a moratorium on customs duties for electronic transmissions.
5. Implications for India
- Textile Competition: Indian exporters of garments and textiles face a “structural disadvantage” as the tariff gap between Indian and Bangladeshi goods in the US market has effectively vanished or reversed in specific categories.
- Cotton Exports: India, which exported nearly $1.6 billion in cotton yarn to Bangladesh in 2024, may see a decline in demand as Dhaka pivots to US cotton to avail of zero-duty benefits.
- Geopolitical Balancing: The deal highlights Bangladesh’s effort to balance its economic ties between India, China, and the US, especially following the recent cooling of India-Bangladesh bilateral relations.
Q. With reference to the US-Bangladesh Agreement on Reciprocal Trade (2026), consider the following statements:
I. The agreement grants Bangladesh a universal zero-tariff entry for all its textile exports to the United States.
II. Bangladesh has committed to purchasing $15 billion worth of energy products from the US over a period of 15 years.
III. To qualify for certain duty-free benefits under the pact, Bangladeshi manufacturers must utilize US-origin raw materials like cotton.
Which of the statements given above are correct?
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III
Solution: B
• STATEMENT I IS INCORRECT: The zero-tariff benefit is not universal; it is restricted to a "to-be-specified volume" (quota) and is strictly conditional upon the use of US-origin inputs.
• STATEMENT II IS CORRECT: The agreement explicitly includes a long-term energy procurement commitment valued at approximately $15 billion.
• STATEMENT III IS CORRECT: The pact introduces a "reciprocal" mechanism where zero-duty access for garments is linked to the level of US textile inputs (cotton/fiber) used in production
