LDC graduation and FTAs will shape Bangladesh’s future: Great caution is needed
This letter is from Bangladesh CSOs (Civil Society Organisations) who are very concerned with the current direction of the country’s trade and development policy. In light of its impending graduation from least developed country (LDC) status, Bangladesh is rushing to sign bilateral trade agreements, without conducting adequate impact assessments and engaging in public consultations. These trade agreements will have far-reaching consequences for the country’s social and economic development. Moreover, they risk constraining the policy space of future governments to undertake progressive reforms for the benefit of Bangladeshi citizens.
In view of the current political, economic, and social uncertainty, the interim government should prioritise seeking a delay in Bangladesh’s LDC graduation to avoid the premature loss of vital trade preferences. Rather than hastily entering into trade agreements that may further exacerbate existing uncertainties, the focus should be on safeguarding the country’s development trajectory and policy space. These critical decisions will have long-term implications for the lives and livelihoods of the Bangladeshi people.
Impending graduation
The UN Committee on Development Policy (CDP) has decided that Bangladesh will graduate from its LDC status to a developing country on 24 November 2026.1 While this is a meaningful recognition of Bangladesh’s development progress, in practical terms, the country’s graduation is happening at a time of significant political and economic instability. Crucially, the transition will result in Bangladesh losing much of the preferential treatment it has enjoyed as an LDC, particularly in the area of international trade.
Presently, Bangladesh’s economy is still largely dependent on the production and export of mainly textiles and garments, offering largely informal forms of employment. It has large vulnerable populations which suffer from massive poverty and inequality, inadequate access to critical products and services, including food, health, and education. While Bangladesh has made strides in income growth, it still lags very much behind in human development and other development indicators.
Since the CDP decision that Bangladesh is ready to graduate from LDC status, there have been many national and international changes which impact its ability to smoothly, sustainably and irreversibly graduate. These changes include the ongoing economic and social consequences of the recent COVID-19 pandemic, the food crisis of 2022, internal political shifts which, while extremely promising, have also createtheirts own challenges and the current global trade battles unleashed by the current US administration, which have all made Bangladesh even more vulnerable. The Economist noted that even after the 90-day pause in the 37% additional tariff on Bangladesh announced by President Trump in April 2025, Trump’s remaining tariffs represent the most disruptive policy in the history of global trade.’2 Since the decision to graduate was made, we have also just found that US$234 billion (annually US$16billion) has been siphoned off by the fallen regime in the last 15 years.3
Bangladesh first fulfilled the graduation criteria in 2018 and according to CDP this achievement should be sustained for at least three years. In 2021, CDP’s triennial review said that Bangladesh had also passed that review. However, at that time, the national population census of Bangladesh was taking place, and since then experts have challenged the manner in which the census was conducted, stating that the population was reduced to increase the per capita income4. Other economic and social progress shown by the then regime is also alleged to have been rigged to show the progress, which in fact was not real.
Given the above-mentioned scenario, a critical question arises, whether Bangladesh can deal with the loss of preferential treatment, especially in its trade relations. Under the World Trade Organization (WTO) rules, it will lose favourable treatment accorded under the various agreements, including in the areas of agriculture, industrial products and services, threatening both livelihoods and future production potential. In particular, it will lose the preferential access to markets offered by several developed and developing countries. E.g. the EU is Bangladesh’s largest export market (48% of Bangladesh’s exports go to the EU) and for about 93% of Bangladesh’s exports to the EU which currently enter the EU with 0 tariffs while Bangladesh is an LDC, the EU tariff will increase to 9.6% (under developing country preferences or 12% at the general rate) once Bangladesh graduates (and the three year smooth transition period is over5).6 Similarly Canada’s tariffs on Bangladesh’s exports would increase from the current 0% while Bangladesh is an LDC to 16-18% for most garments once Bangladesh graduates and Japan’s tariffs on garments from Bangladesh will jump from 0% as an LDC to 7.4-12.8% once Bangladesh graduates.7 In 2016, the UN calculated that LDC graduation would cause Bangladesh’s exports to fall to the G20 alone by close to 7% and a 2018 analysis estimated Bangladesh’s exports of apparel to the EU, Canada and Australia would fall by 9.8% due to LDC graduation and another 2018 study estimated LDC graduation would cause Bangladesh’s exports to fall by 8.7%.8
In the area of intellectual property (IP), on graduation, Bangladesh will have to implement the TRIPS Agreement, which includes allowing patenting of pharmaceutical products by global pharmaceutical corporations, which will hinder domestic generic production, and increase the prices of medicines as patent monopolies are granted in Bangladesh.
Bangladesh and the LDC Group have been fighting for a transition period of 12 years at the WTO, but there is a lot of resistance against this proposal.
A shift towards bilateral trade agreements or FTAs
As a result of its impending graduation and to counter the expected loss of key markets, Bangladesh is rushing to conclude a large number of bilateral Free Trade Agreements (FTAs), including with Japan, the UAE, Malaysia, South Korea, China as well as with the US to reduce Trump’s April 2025 tariffs.9 With these FTAs, Bangladesh is trying to protect its market access for the textiles and ready-made garments sector, which accounts for 84.58 per cent of its exports. However, to maintain Bangladesh’s competitiveness, the better approach would be to delay its graduation, as FTAs contain many obligations that will be detrimental to Bangladesh, as further explained.
Based on the experience of other countries that have negotiated FTAs with these countries, Bangladesh will have to make massive concessions in areas critical to Bangladesh’s development and future, including on agriculture and fisheries, where partners such as the US and Japan are expectedly making demands. Bangladesh’s applied average agricultural and industrial tariffs are 17.7 and 13.5 per cent, respectively, much higher than any of its partners, so it will have to cut much more than them and open its markets. In fisheries, Bangladesh has an even higher average tariff rate of 23.7 per cent. Interestingly, reciprocal gains in markets of partner countries may be elusive due to the already low tariffs and the massive use of subsidies and standards barriers in these countries. The US, in any case, may not lower the current set of reciprocal tariffs they are threatening partners with. Liberalisation under such FTAs will deeply impact growth and jobs in both agriculture and fisheries, affecting millions of smallholders in Bangladesh. Even other industries, such as the generic pharmaceutical sector, will be adversely impacted.
In addition, Bangladesh will have to make deep concessions in a number of core policy areas which will restrict not only its production and employment potential but also impact its ability to enact policies for sustainable development.
One such area is the IP chapter concessions and the resultant impact on access to affordable medicines and other technology. While Bangladesh is just trying to grapple with the challenges associated with the implementation of the TRIPS Agreement, it will be expected to take on even stronger commitments on IP by partners such as Japan, the US and perhaps even the UAE and South Korea. This may include provisions such as data exclusivity, which prevents the use of trial data for marketing approvals and therefore delays the introduction of generic medicines even when there are no patents on the medicine. These countries may also require Bangladesh to extend patent monopolies beyond the 20 years required by TRIPS and strengthen the enforcement of patents, thus threatening the production and availability of much more affordable generic medicines and the viability of its generic industry.
FTAs with developed countries also often include investor-state-dispute-settlement (ISDS) obligations that will allow foreign multinational companies to sue Bangladesh in an international arbitration tribunal, if they believe their investments have been harmed by the State’s actions, Developed and developing countries as well as LDCs have been sued via ISDS for billions of dollars by foreign investors in these international arbitration cases which have not only cost precious revenues that could be used for development but have also directly challenged governments’ ability to implement policies for climate action, public health, protect livelihoods, preserve natural resources, implement tax policies, improve labour rights and so on. There are 18 known ISDS cases, in each of which the foreign investor won more than US$1billion.10 Bangladesh has already lost an ISDS case in the past;11 such provisions in FTAs would expose Bangladesh even more to such disputes.
Another area of major compromise usually required in these FTAs which will have costly implications is the push for liberalisation of the digital sector which will not only limit potential tariff revenues on e-transmission of digital products and services, but also limit options for designing nationally beneficial digital industrialization and greatly restrict the ability to regulate in many sectors. But most critically, it can lead to a total handover of Bangladesh’s precious resource of data, “the new oil”, to foreign digital corporations. Foreign e-commerce companies are already operating in Bangladesh, but by agreeing to deeper policy intrusions, the future of Bangladesh’s promising digital industry, including national start-ups, may be permanently compromised.
Some of these FTAs may also require liberalisation of Bangladesh’s government procurement market, which represents a significant proportion of its GDP. Bangladesh will be restricted from giving preferences to its domestic industry, farmers, suppliers and vulnerable constituencies, and this opening up of government procurement to foreign firms has already been problematic in Bangladesh. Local firms will struggle to compete with larger, heavily subsidised foreign firms with better capacity and resources, especially if Bangladesh is required by FTAs to remove its tariffs on these imported products.
Finally, both the processes of graduation and bilateral trade negotiations are secret, undemocratic and non-inclusive. There is very little information available on decisions being taken in relation to Bangladesh’s graduation and trade negotiations. Civil society organisations and other affected stakeholders are excluded from the process of decision-making, assessments, and monitoring, despite the vast implications for Bangladesh’s development prospects and its people.
Way forward
Given this situation, we urge the government to take two concrete steps to address the challenges.
1. Bangladesh should delay its LDC graduation as the current social, political and economic conditions are so obviously not conducive for graduation. We should take time to conduct a comprehensive, transparent and inclusive assessment of the impacts of graduation. Bangladesh also needs to develop a National Strategy to recover from those impacts after possible graduation in future. There are multiple examples of LDCs delaying their graduation based on self-assessment of the effects of that transition.
2. Bangladesh must immediately halt the various FTA negotiations. Any such negotiations should only take place after conducting transparent and inclusive impact assessments. These assessments should include perspectives from a broad range of stakeholders, including farmers, fishers, industry bodies, patient groups, workers, academics and civil society organisations.
At this critical juncture, the interim political leadership should show strength and courage in ensuring stability, certainty and retaining policy space for upcoming governments to pursue their promised progressive reform agenda. This is not possible if Bangladesh loses its trade preferences by prematurely graduating from the LDC status or by rushing into FTAs that will limit policy space and tie the hands of future governments.
Notes
- https://www.un.org/development/desa/dpad/least-developed-country-category-bangladesh.html
- https://www.thedailystar.net/news/bangladesh/news/16b-siphoned-every-year-avg-during-al-rule-3765671
- https://www.dhakatribune.com/bangladesh/politics/291270/bnp-incorrect-population-size-presented-to-show
- https://www.whitehouse.gov/wp-content/uploads/2025/04/Annex-I.pdf from https://www.whitehouse.gov/presidential-actions/2025/04/regulating-imports-with-a-reciprocal-tariff-to-rectify-trade-practices-that-contribute-to-large-and-persistent-annual-united-states-goods-trade-deficits/ - HYPERLINK "https://gsphub.eu/about-gsp/eba"https://gsphub.eu/about-gsp/eba from HYPERLINK "https://policy.trade.ec.europa.eu/development-and-sustainability/generalised-scheme-preferences_en"https://policy.trade.ec.europa.eu/development-and-sustainability/generalised-scheme-preferences_en
- Table 1 and Table I.2 of https://policy.desa.un.org/sites/default/files/2025-06/bangladesh.pdf (because Bangladesh is unlikely to be eligible for the EU’s GSP+ because Bangladesh’s share of EU GSP-covered imports was 17% and it must be less than 7.4%: https://gsphub.eu/about-gsp/gsp-plus from https://policy.trade.ec.europa.eu/development-and-sustainability/generalised-scheme-preferences_en
- https://policy.desa.un.org/sites/default/files/2025-06/bangladesh.pdf
- https://policy.desa.un.org/sites/default/files/2025-06/bangladesh.pdf
- https://www.hindustantimes.com/world-news/bangladesh-to-slash-duties-on-more-than-100-us-goods-ahead-of-tariff-talks-report-101747747890501.html
- https://investmentpolicy.unctad.org/investment-dispute-settlement?id=16&name=bangladesh&role=respondent,
- https://investmentpolicy.unctad.org/investment-dispute-settlement/cases/207/saipem-v-bangladesh
- https://www.economist.com/finance-and-economics/2025/04/09/despite-the-pause-americas-tariffs-are-the-worst-ever-trade-shock
