Bangladesh Plans to Shift from Indian to U.S. Cotton

Bangladesh’s plan to shift cotton imports from India to the U.S. could reshape regional trade dynamics, impact India’s textile export sector, and strengthen U.S.–Bangladesh economic ties.

Table of Contents

Context

Bangladesh has announced plans to gradually replace Indian cotton with U.S.-produced cotton following the newly signed U.S.–Bangladesh Agreement on Reciprocal Trade.

Why Bangladesh Is Shifting to U.S. Cotton

Tariff Advantage in the U.S. Market: Under the agreement:
- Bangladesh secured a 19% reciprocal tariff rate (better than some competitors like Cambodia and Indonesia).
- A special clause allows zero tariff access if Bangladeshi exporters use U.S.-origin cotton or MMF.
- Since the U.S. is Bangladesh’s largest export market for garments, this preferential access provides a major competitive edge.
Bangladesh’s Structural Advantage
- Bangladesh does not produce cotton domestically it does not have a cotton farmer lobby.
- This gives Dhaka greater flexibility in switching suppliers without domestic political resistance—unlike countries where farmer groups influence trade policy.
Background of Trade Tensions
- In April 2025, Bangladesh restricted yarn imports from India through land ports. In response, India imposed curbs on certain Bangladeshi garment imports in May 2025.

India’s Concerns

Impact on Indian Exports: Bangladesh is a major buyer of Indian cotton and yarn. In 2024, India exported about $1.6 billion worth of cotton yarn and nearly $85 million of manmade fibre (MMF) yarn to Bangladesh.
This could affect cotton farmers, yarn manufacturers, and textile hubs like Tiruppur and Coimbatore.

Practical Challenges for Bangladesh

Cost and Logistics: Importing cotton from the U.S. involves higher freight and longer shipping time. Even with zero tariffs, total costs must remain competitive.
- On the other hand India’s export takes place through land ports, making it fast and cost-effective.
Quality Concerns: Cotton quality affects garment exports. Bangladesh must ensure U.S. cotton matches Indian or Egyptian standards to maintain product quality.
Risk of Dependence
Trade agreement may limit Bangladesh’s freedom to buy cotton from multiple countries.
Heavy reliance on U.S. cotton could limit Bangladesh’s flexibility and increase vulnerability to supply or price disruptions.

India–Bangladesh Textile Trade: Interdependence and Competition

Bangladesh is the second-largest exporter of ready-made garments (RMG) globally with an 8–9% share, while India ranks around seventh with 3–4% share.

Bangladesh’s garment success has historically depended on cheap labour combined with Indian raw material support, especially cotton and yarn.

India’s Role in Bangladesh’s Textile Rise

● Raw Material Backbone

○ India supplies 78–82% of Bangladesh’s yarn imports.

○ Annual exports: nearly $2 billion worth of yarn (~700 million kg).

○ India exported $1.6 billion cotton yarn to Bangladesh in 2024-25.

● Indian yarn ensured:

○ Consistent quality

○ Quick delivery through land ports

○ Competitive pricing

● Trade Facilitation Support

● Duty-free access under SAFTA for Bangladeshi garments.

● Transshipment facilities via Indian ports reduced logistics cost.

● Electricity exports (2,300+ MW) supported industrial growth.

Bangladesh’s growth partly operated under India’s “strategic and logistical umbrella.”

Emerging Competitive Phase (Current Trends)

● US-Bangladesh deal shifts cotton sourcing: Bangladesh may replace Indian cotton with U.S. cotton to gain zero-tariff access in the U.S., weakening India’s yarn exports.

● India-EU FTA increases competition: If tariffs are removed under the India-EU FTA, Indian garments will compete directly with Bangladeshi exports in Europe.

● Growing political trust deficit: Recent diplomatic tensions and policy restrictions have reduced economic coordination, making trade relations less stable.

Read More Notes
Environment Notes	Art and Culture Notes
Science and Tech	History Notes
Geography Notes	Indian Polity Notes
General Knowledge	International Relation