A Comparative
Analysis of Bangladesh-Japan EPA and Bangladesh-USA RTA
In recent years, Bangladesh has accelerated its efforts
to diversify trade partnerships and secure long-term economic opportunities as
it approaches graduation from Least Developed Country (LDC) status. Two of the
most notable developments in this direction are the newly negotiated trade
arrangements with Japan and the United States. While both agreements aim to
deepen economic engagement and improve market access, their design,
obligations, and long-term implications for Bangladesh differ substantially. A comparative
assessment of the Bangladesh–Japan Economic Partnership Agreement (EPA) and the
Bangladesh–US Reciprocal Trade Agreement (RTA) reveals two contrasting models
of trade cooperation—one emphasizing long-term development partnership and the
other reflecting a more transactional approach to market access.
The Bangladesh–Japan EPA represents a comprehensive
framework designed to strengthen bilateral cooperation across multiple sectors,
including trade in goods and services, investment, intellectual property, labor
standards, and environmental cooperation. Negotiations for the EPA began in
March 2024 and progressed through several rounds of discussions in Dhaka and
Tokyo before reaching agreement. Rather than focusing narrowly on tariffs, the
EPA seeks to build a broad economic partnership that supports Bangladesh’s
structural transformation and post-LDC transition. One of the most significant
provisions of the agreement is the granting of duty-free access for
approximately 7,379 Bangladeshi products to the Japanese market. This
concession could significantly enhance the competitiveness of Bangladeshi
exports, particularly in manufactured goods, by reducing trade costs and
improving price competitiveness.Trade data illustrate the importance of this
opportunity. In the fiscal year 2024–25, Bangladesh exported goods worth about
USD 1.41 billion to Japan, while imports from Japan reached approximately USD
1.87 billion, highlighting a persistent trade imbalance. Hence, by expanding
duty-free access and simplifying rules of origin and tariff procedures, the EPA
could help narrow this gap. However, the realization of these benefits will
depend heavily on Bangladesh’s domestic administrative capacity, particularly
in customs management, certification systems, and export verification
mechanisms.
Beyond trade in goods, the Bangladesh-Japan EPA also
promotes investment and technological cooperation. It provides a transparent
investment framework that ensures equal treatment and protection for investors
from both countries while encouraging greater Japanese investment in
Bangladesh. Moreover, the EPA acknowledges the growing importance of the
digital economy by incorporating provisions related to e-commerce, digital
signatures, online transactions, and personal data protection. These measures
are expected to facilitate technology-driven economic cooperation and
strengthen Bangladesh’s integration into global value chains. Importantly,
unlike temporary preferential arrangements such as generalized system of
preferences (GSP) schemes, the EPA provides a binding and permanent guarantee
of market access, which is particularly valuable as Bangladesh prepares for LDC
graduation.
In contrast, the Bangladesh–US Reciprocal Trade
Agreement (RTA) follows a markedly different structure. While the RTA does
provide certain benefits for Bangladeshi exporters, its concessions are
comparatively limited and accompanied by substantial obligations. Under the
agreement, the United States will provide duty-free or preferential access for
approximately 2,500 Bangladeshi products and reduce the reciprocal tariff on
Bangladeshi exports from 20 percent to 19 percent. Although this reduction
offers some relief to exporters facing high tariff barriers in the US market,
the scale of tariff concessions remains modest relative to the commitments
required from Bangladesh. One major concern relates to market opening. The
agreement requires Bangladesh to provide duty-free or preferential access to
around 6,700 US products, including chemicals, machinery, medical devices,
motor vehicles, and agricultural commodities such as beef and poultry. Such asymmetry in market access could expose
domestic industries—particularly small and medium enterprises—to significant
competitive pressure.
More critically, the RTA contains binding commercial
purchase commitments that may constrain Bangladesh’s policy flexibility. The
agreement obligates Bangladesh to procure 14 aircraft from Boeing, import
approximately USD 3.5 billion worth of US agricultural products, and purchase
an estimated USD 15 billion in US energy supplies over a fifteen-year period. These requirements effectively transform parts
of the agreement into structured import commitments designed to offset
bilateral trade imbalances. The regulatory dimension of the RTA also raises
concerns about national policy autonomy. Bangladesh is required to recognize
certifications issued by institutions such as the U.S. Food and Drug
Administration and adopt US vehicle safety and emissions standards. Furthermore, the agreement mandates acceptance
of certain biotechnology products approved in the United States without
additional domestic testing or labeling requirements, potentially affecting
Bangladesh’s biosecurity and regulatory independence. Perhaps the most
controversial provision relates to strategic conditionality. The agreement
includes a clause allowing the United States to impose punitive tariffs or
terminate the arrangement if Bangladesh enters trade agreements with
“non-market economies,” a category commonly associated with countries such as
China or Russia. This condition introduces a geopolitical dimension to what is
otherwise a commercial agreement and could restrict Bangladesh’s future trade
diplomacy.
Another noteworthy feature is the so-called
“zero-percent cotton clause,” which allows certain Bangladeshi garments to
enter the US market at zero duty only if they are produced using US-origin
cotton or synthetic fibers. While this mechanism could boost apparel exports,
its feasibility remains uncertain given the higher transportation costs
associated with sourcing raw materials from the United States rather than from
regional suppliers such as India. Taken together, these differences highlight
two distinct philosophies of economic engagement. The Japan EPA is structured
as a multi-sectoral partnership that emphasizes investment, technology
transfer, and long-term market access—elements that align closely with
Bangladesh’s development trajectory. In contrast, the US RTA reflects a more
transactional model, where limited market access is accompanied by extensive
commercial obligations and regulatory conditions.
For Bangladesh, the challenge lies in balancing these
external economic relationships while safeguarding domestic industries and
policy autonomy. Strategic engagement with major partners remains essential,
but the experience of these two agreements suggests that not all trade deals
offer the same developmental value. As Bangladesh transitions into a post-LDC
economy, future trade negotiations will need to prioritize partnerships that
support sustainable growth, preserve strategic flexibility, and enhance the
country’s integration into global production networks.
