US initiates trade investigation on Bangladesh and major exporters

The Office of the United States Trade Representative (USTR) has launched investigations into the manufacturing sectors of several economies, including Bangladesh, citing concerns over structural excess capacity and production.

Bangladesh is among 16 economies under investigation, alongside China, the European Union, India, Vietnam, Indonesia, Malaysia, Thailand, Cambodia, South Korea, Japan, Mexico, Singapore, Switzerland, Norway and Taiwan under Section 301 of the Trade Act of 1974.

According to the Federal Register notice, the allegation against Bangladesh is that government-provided cash incentives to export sectors have contributed to a multi-billion-dollar trade gap with the United States in Bangladesh's favour.

"Evidence of structural excess capacity and production exists for Bangladesh, which has a bilateral goods trade surplus of $6.15 billion with the United States. This bilateral surplus is led by exports in the textiles sector," the notice reads.

It stated that the government provides cash incentives for exports across 43 sectors in Bangladesh, including domestic textiles and leather products.

Furthermore, Bangladesh's cement industry is facing significant excess capacity amid the sector's worst downturn in years. National cement consumption dropped to 38 million tonnes in 2024, which is less than 40% of the country's total production capacity, and is expected to decline further in 2025.

In a statement issued on Wednesday (11 March), US Trade Representative Jamieson Greer said the investigation will assess whether the policies and practices of the concerned economies are "unreasonable or discriminatory" and whether they burden or restrict US commerce.

According to USTR, the investigation focuses on whether these economies maintain structural excess production in manufacturing sectors that could distort global markets and undermine US domestic industry.

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"The United States will no longer sacrifice its industrial base to other countries that may be exporting their problems with excess capacity and production to us," Greer said.

The probe comes as the administration pushes its broader reindustrialisation agenda, arguing that many trading partners are producing more manufactured goods than their domestic markets can absorb. According to the USTR, such overproduction may displace existing US manufacturing or discourage new investment in domestic production capacity.

Under Section 301, the USTR is authorised to investigate foreign government acts, policies or practices that may unfairly affect US commerce. If the investigation finds such practices to be unreasonable or discriminatory, the United States could impose trade remedies, including tariffs or other restrictions.

As part of the process, the USTR has formally requested consultations with the governments of the economies under review, including Bangladesh.

A public comment docket will open on 17 March, with stakeholders allowed to submit written comments and requests to testify at a hearing by 15 April. The USTR is scheduled to hold a public hearing on the investigations starting 5 May.

Bangladesh exports more than $8 billion worth of goods to the US market annually, with ready-made garments accounting for the lion portion of the shipments. However, experts say that although the government provides cash incentives to this sector, it has not created overcapacity or barriers to trade in the US market.

Dr Mostafa Abid Khan, an international trade expert and former member of the Bangladesh Trade and Tariff Commission, told The Business Standard, "The incentives Bangladesh provides to its export sector fall within the policy framework of the World Trade Organization (WTO). The question may arise whether these incentives encourage overcapacity."

"I do not think the level of support provided by the government is encouraging overcapacity," he added.