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Vietnam’s FTA with EU may hurt Bangladesh

The EU-Vietnam free trade agreement is set to come into force this year. The trade agreement would eliminate virtually all tariffs on goods traded between the two sides.

However the agreement might pose a challenge to Bangladesh’s struggling readymade garment export business. It would eliminate the existing disadvantage of Vietnam in the EU market. Bangladesh might lose its competitiveness in the EU market by 12 to 15 per cent as Vietnam would get the same percentage of duty benefit in the market. The EU is the largest export destination for Bangladesh and the country enjoys generalised scheme of preferences in the economic bloc. Bangladesh’s readymade garment exports have been struggling for the last few months due to a global slowdown in demand and fall in prices. Although, Bangladesh is the second largest readymade garment exporter in the world, the country’s global market share has been reducing for the last few months while Vietnam has been grabbing a bigger share. Bangladesh’s share in the global clothing market decreased by 0.1 percentage point to 6.4 per cent in 2018, which was 6.5 per cent in 2017. While Vietnam narrowed the gap by 0.3 percentage points to 6.2 per cent in 2018 from 5.9 per cent in 2017.