Bangladesh’s overall exports to the European Union (EU) could fall by up to 20 percent due to the combined effects of the country’s impending graduation from least developed country (LDC) status and the EU-Vietnam Free Trade Agreement (EVFTA), according to a new study.

The findings, presented by Mohammad Abdur Razzaque, chairman of Research and Policy Integration for Development (RAPID), were shared at a seminar in Dhaka.

The study, conducted jointly by RAPID and the German political foundation Friedrich-Ebert-Stiftung, highlights the significant challenges Bangladesh faces in maintaining its competitive edge in the EU market.

The study projects that Bangladesh’s apparel exports to the EU, a key driver of its export economy, could decline by 1.8 percent. In comparison, leather and leather goods exports may drop by 6.5 percent due to trade diversion triggered by the EVFTA.

Razzaque noted that Vietnam, a key competitor, has surpassed Bangladesh in EU exports. “By 2023, Vietnam’s exports to the EU were more than double that of Bangladesh’s, despite both countries having similar export volumes in 2002,” he said.

The EVFTA, which came into force in 2020, grants Vietnam extensive trade privileges, including zero-duty access to the EU market. This has replaced the country’s earlier inclusion under the Generalised Scheme of Preferences (GSP) and offers Vietnam additional benefits such as removing non-tariff barriers, expanding market access for services, and aligning with EU labor and environmental standards.

Bangladesh benefits from duty-free access to the EU under the “Everything but Arms” (EBA) initiative, a privilege extended exclusively to LDCs. However, the country is set to lose this benefit upon graduation from LDC status, further intensifying the competitive pressures.

Razzaque emphasized that Bangladesh’s reliance on the EBA and its relaxed rules of origin has been critical in expanding apparel exports to the EU. The loss of this privilege, combined with the advantages afforded to Vietnam under the EVFTA, poses a serious threat to Bangladesh’s market share in Europe.

The study underscores Bangladesh’s urgent need to adopt forward-looking policies to remain competitive in the evolving global trade landscape. Razzaque pointed out that Vietnam has made substantial progress by streamlining its business environment, diversifying its export basket, and opening up trade and investment opportunities. Bangladesh, on the other hand, remains heavily reliant on apparel exports with limited diversification.