Bangladesh is preparing for a critical economic transition as it graduates from Least Developed Country (LDC) status to developing nation status in November 2026. This shift will have major implications for the country’s exports, particularly with its largest trading partner, the European Union (EU).

To mitigate potential trade disruptions, the Bangladeshi government is launching a feasibility study to identify priority areas for negotiating a Free Trade Agreement (FTA) with the EU, while also pursuing the GSP Plus preferential trade scheme.

Current Trade Status

At present, Bangladesh enjoys duty-free access to the EU, which imports over $25 billion worth of goods from the country annually—more than 60% of Bangladesh’s total shipments. This preferential treatment has been vital for the competitiveness of Bangladesh’s key export sector: garments.

However, after LDC graduation, Bangladesh risks losing this advantage, facing tariffs of up to 12% on exports to the EU, which could erode its market share.

Negotiation Options: GSP Plus vs. FTA

• GSP Plus: Offers continued duty-free access, but requires ratification of 32 international conventions on governance, human rights, labor, and environmental protection. Experts note that some conventions are difficult to meet due to stringent conditions. Additionally, Bangladesh’s garment exports may face disqualification under GSP Plus caps.
• FTA: Provides a broader framework with fewer conditions, allowing Bangladesh to negotiate trade terms directly. While more complex, an FTA may be a more sustainable solution than relying solely on GSP Plus.

Key Challenges

• Compliance Burden: Ratifying and implementing 32 conventions for GSP Plus qualification.
• Garment Sector Vulnerability: Caps and thresholds could limit benefits for Bangladesh’s largest export earner.
• Increased Competition: After graduation, Bangladesh will compete more directly with established developing countries with existing FTAs.
• Economic Vulnerability: Loss of preferential access could impact employment in export-driven industries.

Strategic Responses

Experts emphasize the need for intensive negotiations with the EU, alongside efforts to:

• Diversify export markets beyond the EU.
• Strengthen trade capacity and infrastructure.
• Invest in compliance mechanisms to meet global labor and environmental standards.
• Build resilience in key sectors like textiles and garments.

Key Data Summary

Factor	Current/Projected Impact
LDC Graduation Date	November 2026
Current EU Trade Status	Duty-free access under Everything But Arms (EBA) scheme
EU Imports from Bangladesh	$25+ billion (60% of exports)
Tariffs Post-Graduation	Up to 12% on key exports
GSP Plus Requirement	Ratification of 32 conventions
Garment Sector Concern	May not qualify for benefits due to caps/thresholds
FTA Option	Broader framework, fewer conditions than GSP Plus
Economic Risk	Loss of competitiveness, employment impact
Strategic Need	Market diversification, trade capacity building

Conclusion

Bangladesh’s graduation from LDC status presents both risks and opportunities. While the loss of duty-free access threatens its export competitiveness, especially in garments, proactive engagement through FTA negotiations with the EU and compliance with global trade standards could secure a stronger, more sustainable trade future.