From rules-based to deals-based trade: Challenges and choices for Bangladesh

The EU has urged Bangladesh to ensure that European companies are provided with a level playing field, particularly in strategic sectors such as aviation, so that they are not treated less favourably than firms from other countries, especially from the US.

This request is linked to Bangladesh's recent decision to purchase aircraft from the US's Boeing company as part of its ongoing trade negotiations with the United States, aimed at minimizing the effects of Trump-era tariffs.

As reported in various media outlets, the EU similarly wants a favourable environment for European companies from different sectors to operate in Bangladesh. However, the EU has framed its demands under the principles of transparency, non-discrimination in market access and procurement, and reciprocal openness in trade and investment with Bangladesh.

While the EU's position appears consistent with its emphasis on a rules-based system, rather than a power-driven or deal-based approach, for countries like Bangladesh, it effectively becomes a battleground for competing geopolitical interests.

Turning to Bangladesh's concerns, the first point to note is that the global trade environment is shifting away from, even with all its limitations, a functionally rules-based system toward more deal-oriented and privilege-driven arrangements. Trade rules are increasingly being rewritten based on the geopolitical leverage of powerful countries such as the United States.

During the Trump administration, the US began negotiating special concessions rather than adhering to established multilateral norms, and most countries had to respond positively, thereby legitimizing a new, deals-based global trading order. These pressures will not be contained to the US, and other leading economies may equally well apply such tactics if a rules-based multilateral system further deteriorates.

These dynamics exposes smaller economies like Bangladesh to bilateral bargaining, where powerful nations demand that their firms receive the same preferential treatment the US has secured. Such a process is far less predictable and far more dependent on political circumstances. From this perspective, Bangladesh risks being squeezed between competing partners, each seeking concessions in exchange for market access or diplomatic favour.

This situation suggests that Bangladesh cannot depend on past practices without undertaking serious internal reforms. Domestically, long-overdue reforms in streamlining tariff and non-tariff barriers, improving trade facilitation, and significantly enhancing the regulatory and business environments must be prioritized.

If the domestic economy and export sectors remain uncompetitive, or if regulatory bottlenecks persist, even "favourable" trade deals will fail to yield meaningful benefits. In essence, such reforms will not only make Bangladesh more attractive to external partners; they will also strengthen its capacity to resist being pressured into unequal or disadvantageous arrangements stemming from structural vulnerabilities.

Another major concern for Bangladesh involves labour standards, compliance, and competitiveness, especially in light of its expected graduation from the LDC group in November 2026. These seem to be important for Bangladesh's sustainability.

However, to maintain preferential access to EU markets after LDC graduation and to negotiate new trade agreements with other countries, Bangladesh must demonstrate substantial progress in these areas. But it is not only external demands, though, that are difficult to address; internal capacity constraints and intricate domestic political economy dynamics have also proven challenging.

In the long run, the global trading system cannot remain dominated by a "privilege-for-one" or "deal-for-the-powerful" approach without deepening instability and inequality. Bangladesh must, then, develop resilience now while the new world order is still taking shape; in this sense, proactively steering its own course, rather than merely being buffeted by events.

If Bangladesh invests today in infrastructure, trade and investment policy reforms, business climate reforms, regulatory modernisation, labour standards, and export competitiveness, then it will be much better positioned to benefit when the next phase of global trade arises; hopefully one that is more inclusive and genuinely rules-based.

The time to act is now, because when change comes, it will reward those who are prepared, not those who rely on legacy privileges.

Dr Selim Raihan is the executive director of the South Asian Network on Economic Modelling (Sanem).

Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinions and views of The Business Standard.