Bangladesh may offer zero-duty on US goods to get reciprocal tariff relief

Following the US decision to cut reciprocal tariffs on Vietnamese imports from 46% to 20%, Bangladesh now considers offering zero-duty access to American goods, aligning with Washington's expectations in exchange for tariff relief.

Officials say Bangladesh will positively consider the document or tariff expected to be sent by the United States as an annexure to the proposed reciprocal tariff agreement. 

However, Dhaka has already informed the United States Trade Representative (USTR) that it cannot adhere to US domestic laws in international trade as stipulated in the draft agreement. Instead, Bangladesh prefers to sign the agreement under the regulations of the World Trade Organization (WTO).

Commerce Secretary Mahbubur Rahman, speaking to TBS yesterday (5 July), said, "We have no significant objection to providing tariff concessions on US products." 

He added that the government has already taken initiatives to increase imports of various goods, including aircraft, LNG, and wheat from the US. 

"If tariffs on US products are withdrawn, the private sector will also be encouraged to increase imports from that country. There is no fear of domestic industries being harmed by this," he affirmed.

When asked about the tough conditions in the draft agreement sent by the US, the secretary confirmed, "We are continuing negotiations on those matters. They are on board, and so are we. We have informed them that we cannot carry those conditions. We want to enter into a reciprocal tariff agreement within the WTO regulations."

Optimism for lower tariffs than Vietnam

Despite Bangladesh's stance, the US had shown interest in sending the annexure document for the agreement and holding a subsequent meeting. The USTR had not yet sent the document as of yesterday. 

The commerce secretary said, "The USTR has told us that they will establish separate tariff rates for LDCs (Least Developed Countries). For this reason, we believe our tariff rate will be lower than that of Vietnam."

Mahbubur further said, "We are negotiating the agreement with the US while prioritising national interest, export interest, and especially the interest of the ready-made garment industry, all within WTO regulations."

Reciprocal tariffs and ongoing talks

On 2 April, the US imposed increased reciprocal tariffs on various countries, including a 37% tariff on Bangladesh. Subsequently, US President Donald Trump implemented a minimum 9% additional duty and suspended the remaining tariffs for three months, a period set to expire on 9 July. During this time, various countries have been engaging in agreements with the US to reduce their imposed tariffs.

President Trump last week announced that the reciprocal tariff imposed on Vietnam, Bangladesh's main competitor in ready-made garment exports to the US, would be reduced from 46% to 20% after Vietnam lifted tariffs on US goods.

Despite the suspension of reciprocal tariffs being set to end on 9 July, the proposed 37% tariff rate on Bangladesh would not be implemented, according to the secretary. 

"We had inquired about this with USTR officials. They told us that it should not happen because we are continuing negotiations with them," he said.

Bangladesh has been actively continuing discussions to finalise the agreement with Commerce Adviser Sk Bashir Uddin and National Security Adviser Khalilur Rahman taking part in the talks.  

Secretary Mahbubur confirmed that positive discussions took place in Washington on the night of 3 July. An understanding was reached that the US would send the annexure document to Bangladesh before that meeting. 

The commerce adviser was reportedly in contact with the USTR and relevant US administration officials regarding this agreement while in the US.

The next meeting is scheduled for 9 or 10 July in Washington. 

Officials from the commerce ministry said the secretary was scheduled to travel to Washington today following the report to physically participate in the next meeting with the USTR. However, since the annexure document from the US had not been received as of Saturday, his travel was postponed.

The secretary clarified, "Until now, discussions with the US have focused on the descriptive aspects of the agreement. An understanding regarding sending the annexure was reached at the 3 July meeting. After receiving the annexure, I will go to the US after finalising Bangladesh's position in a meeting with the technical committee."

The officials also noted that the US proposal for the reciprocal tariff agreement differed from Bangladesh's ongoing FTA or PTA negotiations with various countries. 

Typically, in bilateral trade agreement discussions, both parties first negotiate and agree on the annexure before discussing the agreement's boundaries and offers. Following this, the descriptive part of the agreement is negotiated. However, the US had initiated the agreement negotiation in reverse order.