The India-US trade deal, which is expected to be signed next month, will also have provisions on the lines of the one in the Bangladesh-US deal that allows limited quality of Indian textile and clothing to be exported to the US at zero reciprocal duty, Commerce Minister Piyush Goyal said on Thursday.
This comes amid concerns among Indian garment manufacturers that Indian products would continue to face an 18% disadvantage compared to Bangladeshi exports after Dhaka struck a fresh US trade deal this week, following the announcement of an agreement between New Delhi and Washington.
“Bangladesh has received a benefit under its trade deal with the US of exporting textiles and garments [in quota] at zero reciprocal duty if they purchase raw material from the US. India has a similar benefit [under its trade deal with the US]. The fine print of the India-US deal will have details,” Commerce Minister Piyush Goyal told reporters here.
As per the Bangladesh-US joint statement, the US committed to “establishing a mechanism” that will allow for certain textile and apparel goods from Bangladesh to receive a zero reciprocal tariff rate. This mechanism will allow imports of a “to-be-specified volume of apparel and textile” from Bangladesh to enter the United States at this reduced tariff rate, the statement read.
The provisions allowing zero reciprocal duty market access also said that the volume of duty-free textile and apparel products from Bangladesh to the US would be determined on the basis of Dhaka’s imports of “U.S.-produced cotton and man-made fibre textile inputs” from Washington. Bangladesh is the second largest exporter of textiles and apparel goods after China.
India ahead of Bangladesh in spinning capacity
The zero reciprocal duty provision in the India-US trade deal could prove to be a larger advantage for Indian textile and garments, as New Delhi has significantly larger spinning capacity than Dhaka, which means India has higher utilisation of US cotton and hence could get a bigger quota under the provision.
Cotton spinning is the process of twisting strands of cotton fibres to form a yarn, which is used to make apparel and other end-user products. The Indian spinning industry is one of the biggest industries globally, and Bangladesh is a key importer of Indian yarn.
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The share of Indian textile exporters such as Gokuldas Exports, KPR Mills and Arvind Ltd that had slipped up to 7% on Monday following the joint statement, recovered on Thursday and closed up to 4% higher on Thursday after Goyal’s comments.
Notably, Bangladesh is also pushing for a Free Trade Agreement (FTA) with the European Union after India gained a competitive edge in the textile sector with a trade agreement with the European bloc and the UK. In 2024, India accounted for around 5% of the EU’s textile and apparel imports, while China led the pack (28%), followed by Bangladesh (22%), Turkey (11%), Vietnam (6%), and India.
Bangladesh Chief Adviser Professor Muhammad Yunus, on February 1, called for an early start to FTA negotiations with the European Union, after graduating from Least Developed Country (LDC) status. The change of status will result in the country losing a few trade concessions.
Steep terms on Bangladesh for zero reciprocal duty
To get an exemption for its textile industry, a priority sector, Bangladesh accepted steep asks from the US. Dhaka agreed to purchase approximately $3.5 billion of US agriculture products, including wheat, soy, cotton, corn and energy products, with an estimated value of $15 billion over 15 years.
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According to the agreement, Bangladesh agreed to “allow imports of U.S. dairy products of bovine, ovine, and caprine origins when accompanied by a U.S. Department of Agriculture (USDA) Agricultural Marketing Service (AMS) dairy sanitary certificate”. Notably, India has kept dairy out of the India-US trade deal- a long-standing red line for New Delhi in trade negotiations.
Bangladesh also accepted several US standards under the trade agreement as the deal stated that “Bangladesh shall recognise “USDA Food Safety and Inspection Service (FSIS) oversight of U.S. meat and poultry (including offal), meat and poultry products, processed meat and poultry, Siluriformes, and egg product facilities.. ”
Dhaka has also accepted a slew of labour-related commitments that the US has been pushing for in trade deals. The agreement said that “Bangladesh shall resolve or withdraw, as appropriate, pending criminal cases filed against garment workers and labour leaders for engaging in legitimate union and protest activities, including pending criminal cases stemming from the 2023 minimum wage labour unrest”.
The terms of the US-Bangladesh agreement said: “Nothing in this Agreement shall constrain, or otherwise prevent, a Party from imposing additional tariffs to remedy unfair trade practices, to address import surges, to protect its economic or national security, or for other similar reasons consistent with its law”.