On the USA and Bangladesh FTA
Free Trade Agreements (FTAs) play a big role in today’s global economy by helping countries trade more easily, attract more foreign investment, and grow their economies by cutting down taxes and rules that make trade harder. For Bangladesh—a developing country with a fast-growing economy—signing an FTA with the United States, which is its biggest buyer of exports, could be a game-changer. It could boost the country’s economy, especially its important garment industry, and also shift the balance of power in South Asia. But FTAs come with downsides too. They often force countries to make compromises on things like worker protections, environmental rules, and control over patents, which can affect national independence and fairness.
Current Trade Relations is a Foundation of Imbalance
Bangladesh’s trade with the US is mostly one-way—it sells a lot more than it buys. In 2023, Bangladesh exported around $8.5 billion worth of goods to the US, mainly clothes, but only imported about $2.1 billion in return. This creates a big trade surplus. The garment industry, which employs over four million people—mostly women—has played a major role in lifting the country’s economy, helping many people escape poverty and making Bangladesh a major name in global manufacturing. Back in 2000, exports to the US were only $2.4 billion, so the growth has been huge.
This success was partly helped by special trade deals like the Generalized System of Preferences (GSP), which allowed certain products to enter the US without extra taxes until it was stopped in 2013 due to labour rights issues. A Free Trade Agreement (FTA) could bring back and even expand those benefits, possibly boosting exports even more.
However, depending so much on one industry and one country also puts Bangladesh at risk. The US now buys about 20% of everything Bangladesh exports. That’s a steady number, which shows some progress in diversifying trade, but it still means Bangladesh is vulnerable if anything changes in US trade policy. For example, if the US decides to raise import taxes or faces an economic slowdown, it could seriously hurt Bangladesh’s economy. So, while an FTA might offer big advantages, Bangladesh needs to be careful not to make its economy even more unbalanced and should look for ways to grow in other areas too.
Geopolitical Implications: Balancing Big Powers in the Region
Bangladesh sits in a key spot between South and Southeast Asia, making it an important player in the ongoing rivalry between the US and China in the Indo-Pacific region. China has already built a strong presence in Bangladesh through its Belt and Road Initiative (BRI), funding big projects like the Padma Bridge and Karnaphuli Tunnel. Meanwhile, the US sees Bangladesh as a valuable partner to help push for a “free and open Indo-Pacific” and counter China’s influence. A Free Trade Agreement (FTA) could help strengthen US-Bangladesh relations—not just economically, but also strategically—by bringing Bangladesh closer to America’s political goals. This follows a global trend where countries are rethinking who they trade with based on both business and security concerns, something the IMF has recently highlighted.
But this closer relationship with the US could also create problems. It might upset China, leading to less investment or even retaliation. India, which shares a long border with Bangladesh, might also feel threatened if it sees the FTA as giving the US more influence in the region—possibly challenging India’s leadership role in South Asia. Past events like the US-China trade war show how trade deals can turn into major political battles if not handled carefully. So for Bangladesh, this FTA isn’t just about trade—it’s also a strategic move that needs to be managed wisely to avoid upsetting key partners while trying to gain the most from the opportunity.
Sector-Specific Impacts: Chances and Challenges
Bangladesh’s textile industry could benefit a lot from the FTA. Cutting or removing US taxes on imports would likely increase clothing exports and strengthen Bangladesh’s role as a top player in this field. But at the same time, US companies, especially those making higher-end products, might compete more strongly with local businesses, pushing them to improve their quality and come up with new ideas.
The pharmaceutical industry, which is known for making affordable generic medicines, could also grow if it meets the strict rules required to sell in the US. However, the US usually wants stronger protections for patents and copyrights in these deals, which could limit Bangladesh’s ability to produce cheaper generic drugs. This would affect both health care at home and exports.
Agriculture is another important area that might gain, especially with products like shrimp and fish that Bangladesh already exports to the US. But local farmers could face tough competition from large US agricultural companies and might need government help or better technology to keep up.
Newer industries like information technology and renewable energy might also expand if the FTA helps bring in investment and new technologies. The key challenge will be making sure the agreement protects Bangladesh’s strengths while opening up new chances—so that gains in some sectors aren’t lost because of stricter rules or stronger competition.
Challenges and Risks: Economic and Political Issues
While the FTA promises economic growth, there are important risks to consider. Relying too much on the US market could make Bangladesh vulnerable if US policies change or if there’s an economic downturn, which could disrupt Bangladesh’s export-driven economy. This fits into bigger global risks where political tensions can upset trade and economic stability. The FTA might also make income inequality worse, with big cities and export industries benefiting more while rural areas get left behind—something experts have pointed out about globalization’s effects on Bangladesh.
Politically, the FTA could cause disagreements at home. Worker groups might oppose parts of the deal that seem to weaken their rights, while business groups want easier access to markets. On the international stage, China and India will watch closely and might change their own strategies in response. There’s been recent talk online about progress toward a zero-tariff deal, but the exact terms still matter a lot. Bangladesh will need strong rules for resolving disputes and protecting workers and the environment to reduce risks, while also supporting weaker sectors to make sure growth is fair.
A Complicated Relationship
The relationship between the US and Bangladesh has changed since Bangladesh became independent in 1971. Back then, the US quickly recognised Bangladesh and provided help with food and disaster relief. Trade between the two countries, however, has had challenges, especially when the US stopped giving special trade benefits in 2013 because of concerns over worker rights. The FTA could be a fresh start, building on years of cooperation while fixing past problems. Regionally, the deal could affect other trade groups like SAFTA and BIMSTEC. Stronger ties with the US might upset some neighbors who worry about outside influence, but it could also give Bangladesh more power within these regional groups and help it become more connected.
Environmental and Social Concerns
If trade grows because of the FTA, it could lead to more industrial activity that puts extra pressure on Bangladesh’s environment, which is already dealing with problems like rising sea levels and extreme weather. If industries don’t follow sustainable practices, natural resources could be drained faster, so strong environmental rules in the agreement are important. On the social side, more trade might speed up people moving to cities for factory jobs, which could overload city services and infrastructure. The FTA should include ways to monitor and enforce these issues to make sure economic growth doesn’t hurt the environment or social stability.
Policy Suggestions for Bangladesh
To get the most out of the FTA, Bangladesh should focus on:
Improving Infrastructure: Better roads, ports, and transport to cut trade costs and boost competitiveness.
Building Skills: Investing in education and training so workers can succeed in a global market.
Diversifying Exports: Moving beyond textiles to grow industries like IT, renewable energy, and agriculture, so the economy isn’t too dependent on one sector or market.
Strengthening Institutions: Making government and business systems more transparent and accountable to ensure the deal works well.
These actions will help Bangladesh gain the benefits, reduce risks, and become a stronger player in world trade.
Finding the Right Balance
The US-Bangladesh FTA offers a big chance for economic growth and more influence internationally, but it also brings risks like dependence on one partner and growing inequality. By pushing for deal terms that support technology sharing, skill development, and protections for key sectors, Bangladesh can shape the agreement to fit its long-term goals. Expanding trade partners and investing in the country’s own strengths will help make sure the benefits last. As talks move forward, Bangladesh is at an important point where it can set an example for other developing countries balancing the pros and cons of global trade.
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Geopolits Research Desk
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