Bangladesh’s Trade Stability Under Strain as Interim Govt Faces Global Pushback
New Delhi, Dec 1 (Chronicle) — Bangladesh’s foreign trade landscape is undergoing one of its most turbulent phases in recent years, with mounting tensions involving key partners such as China, India, Japan, the United States, and the European Union. The Dhaka-based Daily Sun reported that a series of policy missteps by the Muhammad Yunus-led interim government has contributed to heightened trade risks, economic pressures, and growing external demands — all unfolding at a moment when Bangladesh is about to graduate from the Least Developed Country (LDC) category.
The shift comes at a critical juncture for the country. LDC graduation means that the long-standing tariff benefits and trade preferences Bangladesh enjoyed will gradually disappear, leaving its export-driven economy — especially the RMG (Ready-Made Garments) sector — more vulnerable in the global marketplace.
China Turns Cautious After US Deals
Initially, Dhaka appeared to move closer to Beijing following the July political transition. China remains Bangladesh’s largest trading partner, supporting critical sectors ranging from infrastructure to textiles. However, after Bangladesh signed trade-related understandings with the United States, Beijing has reportedly adopted a more cautious stance.
Although China has verbally assured Dhaka that it will extend tariff benefits even after LDC graduation, no written guarantee has been provided. This lack of commitment raises significant concerns for exporters, particularly because China is a key destination for Bangladesh's raw materials and manufacturing inputs.
Analysts in Dhaka believe that the interim government’s attempt to simultaneously secure strategic advantages from both the US and China has instead created mistrust between the global rivals — leaving Bangladesh caught in the middle.
Strained Ties with India Slow Cross-Border Trade
India — Bangladesh’s second-largest trade partner — has also expressed dissatisfaction over unresolved bilateral issues. Multiple disagreements involving import restrictions, land-route policies, and commodity-specific regulations have caused a slowdown in cross-border trade.
One immediate consequence is the increased cost of essential imports. For example, Bangladesh previously sourced rice from India at competitive prices. Now, due to policy disagreements, Dhaka has been forced to purchase rice from Singapore at significantly higher rates — burdening an already fragile economy.
Officials familiar with the matter told local media that trade tensions reflect a lack of coordination and diplomatic clarity within the interim government, which has disrupted traditionally stable India–Bangladesh cooperation.
Japan Seeks Concessions, Citing the US Agreement
Japan, another long-standing development partner, has also adopted a firm stance. Tokyo insists that any future Economic Partnership Agreement (EPA) mirror the concessions that Bangladesh offered to the United States.
Japan’s primary demand: a substantial reduction in high import tariffs on automobiles.
The interim government’s decision to conclude agreements with Washington without consulting domestic industries or evaluating long-term implications has fueled complications. Negotiations with Japan have since stalled, with Tokyo citing unfair trade imbalance.
For Bangladesh, this poses major risks. Japan is a major investor in the Matarbari deep-sea port, special economic zones, infrastructure, and energy projects. A strained relationship could slow down critical development initiatives.
European Union Signals Displeasure Over Airbus Commitments
The European Union — Bangladesh’s most secure and largest export market — has quietly expressed concern over Dhaka’s recent strategic shift toward the United States.
The centerpiece of this tension is aviation.
To obtain reciprocal trade benefits from the US, Bangladesh reportedly agreed to large purchases of Boeing aircraft and LNG. However, Dhaka had already committed to purchasing 10 Airbus aircraft from France, a deal strongly backed by the EU.
Now, Brussels expects Dhaka to honour that commitment — warning that any deviation could affect Bangladesh’s eligibility for the GSP Plus scheme after its LDC graduation.
Germany’s Ambassador in Dhaka, during a recent DICAB event, issued what observers described as a veiled diplomatic warning, cautioning the interim government against reneging on prior agreements.
Experts Warn of ‘Long-Term Damage’
Economists in Bangladesh are increasingly vocal.
MK Muzeri, former Director General of the Bangladesh Institute of Development Studies (BIDS), sharply criticised the interim government’s trade decisions, saying they were taken hastily and without consultation with the private sector.
He warned that:
“The understanding reached with the United States will influence Bangladesh’s trade in the long term. Other countries may now impose similar conditions. Most of Bangladesh’s export income comes from Europe, and any complication with Airbus purchases will naturally provoke a response.”
Similarly, the former Chief Economist of Bangladesh Bank noted that the current leadership’s policy choices may impose heavy burdens on the next elected government — ranging from tariff negotiations to structural reforms.
The Road Ahead: A High-Stakes Transition
As the country prepares to lose its LDC privileges, the stakes could not be higher. Bangladesh must simultaneously:
• Preserve access to its largest export markets
• Balance relations with global powers competing for influence
• Protect domestic industries facing rising import costs
• Avoid diplomatic fallout with long-standing development partners
Observers say that Dhaka’s diplomatic choices in the next six months will shape its economic trajectory for the next decade.
Final Thoughts from Chronicle.thetrendingpeople.com
Bangladesh stands at a defining crossroads. As it steps out of LDC protections, the country must manage complex diplomatic demands while safeguarding its economic interests. The interim government’s rapid and, at times, unilateral decisions have triggered political ripples across major trade partners. While some tensions may be temporary, others could reshape Bangladesh’s long-term development trajectory. The challenge ahead lies not merely in repairing disrupted relationships, but in rebuilding trust — both internationally and within the country’s own business community.
