Dhaka has secured a reduced 19% tariff under a US-Bangladesh trade deal signed on Monday, with exemptions on textiles and garments made using raw material imported from the US.
Muhammad Yunus, chief advisor heading Bangladesh’s interim government, said Washington D.C. had “committed to establishing a mechanism for certain textile and apparel goods from Bangladesh using US-produced cotton and man-made fiber to receive zero reciprocal tariff in (the) U.S. market”.
US-Bangladesh trade deal: Key highlights
- Washington agrees to create a mechanism for zero reciprocal tariffs.
- Bangladesh to lower some tariffs over several years.
- Bangladesh to ease non-tariff barriers for US goods.
- Bangladesh pledges to buy $15 billion in US energy.
- Biman Bangladesh Airlines to buy at least 14 Boeing jets
The White House said Bangladesh had agreed to provide significant preferential market access for US industrial goods and agricultural produce, including medical devices, machinery, cars and automotive components, chemicals, soy products and dairy goods, beef, poultry, tree nuts and fruit.
Bangladesh will also ease non-tariff barriers by accepting US vehicle safety and emissions standards, recognising US Food and Drug Administration certifications and removing import restrictions on remanufactured goods.
The nations also noted recent and upcoming commercial deals including aircraft procurement, around $3.5 billion in purchases of US agricultural products, and an estimated $15 billion in US energy purchases over 15 years.
According to the US-Bangladesh agreement’s 32-page text released by the US Trade Representative’s office, Biman Bangladesh Airlines intends to purchase 14 Boeing aircraft, with options for additional purchases. The airline first announced a Boeing order last July as negotiations were underway.
Bangladesh also will purchase an unspecified amount of US military equipment and limit purchases from certain countries.
Bangladesh also pledged to uphold internationally recognised labour rights and strengthen environmental protections.
Yunus said the agreement followed nine months of negotiations that began in April last year. The South Asian nation had in August secured a reduction in US tariffs on its exports to 20%, down from 37% initially proposed by Washington, offering much-needed relief to the nation’s apparel exporters.
Bangladesh’s first-mover advantage
US Trade Representative Jamieson Greer said Bangladesh was the first country in South Asia to complete a reciprocal trade deal with the US, which is a “meaningful step forward in opening markets, addressing trade barriers, and creating new opportunities for American exporters”.
The readymade garments sector is the backbone of Bangladesh’s economy, accounting for more than 80% of total export earnings, employing about 4 million workers and contributing about 10% to gross domestic product.
According to tariff schedules released by USTR, Bangladesh will cut high tariffs to zero on many farm and food products, such as poultry, pork, seafood, rice, corn and cereal grains when the agreement enters into force.
Other tariffs fall by 50% at the start and are gradually reduced to zero over five or 10 years, depending on the import. It will take a decade for the current 53.6% duty on almonds to fall to zero and five years for the 53.6% duty on four-stroke auto rickshaw engines to be eliminated completely.
Most US tariffs are a flat 19%, but Bangladesh-made pharma ingredients and parts for aircraft are allowed in duty-free, consistent with treatment for other countries that have inked tariff-reducing trade deals with President Donald Trump’s administration.