European Union External Action

Bangladesh and the EU

Politics

The EU is broadly supportive of the Bangladesh government's reform agenda, and emphasises the need for it to deliver on its promises and ensure compliance with its human rights obligations.

Development assistance

The main areas where the EU helps Bangladesh are economic development, human rights, good governance and the environment. 

Under its Multiannual Indicative Programme for Bangladesh 2014-2020, the EU has committed new aid of up to €690 million.

Economy

Today, by revenue, over half of Bangladesh’s exports go to the EU. (55.5% in first quarter of 2016, according to Bangladesh Bank).

This is due largely to the highly advantageous trade terms granted by the EU (the "Everything but Arms" (EBA) scheme).

Bangladesh now enjoys a significant trade surplus with the EU  (Bangladesh-EU trade statistics). 

Key agreements

  • EU-Bangladesh Cooperation Agreement
  • Covers trade, economic development, human rights, good governance and the environment.
  • Agreement on Trade in Textiles Products 
    Regulates the distribution of export licenses from Bangladesh – although today (due to the EBA scheme) Bangladesh no longer has any quota restrictions on its exports to the EU.
  • EU strategy paper for Bangladesh

Trade

The EU is Bangladesh's main trading partner, accounting for around 12% of Bangladesh's total trade.

From 2011 to 2015, Bangladeshi exports to the EU increased from €10.8 billion to €17.6 billion

EU goods trade with Bangladesh

EU–Bangladesh trade documents

Products traded

Bangladesh's main export industry – textiles & clothing (primarily, ready-made garments) – represents about 90% of the country’s total exports to the EU.

Of the rest, products such as frozen food, agri-products, footwear, leather products and bicycles have grown in importance in recent years.

EU exports to Bangladesh are dominated by machinery and transport equipment.

Preferential export treatment

Under the EU's Generalised System of Preferences (GSP),  Bangladeshi goods exports are exempt from normal customs duties, as follows:

  • Standard reductions
    – 3.5% below normal customs duty for sensitive products
    – zero duties for non-sensitive products
    – 20% reduction in duties for textile products.
     (indefinitely) duty-free and quota-free access for all products except arms and ammunition under the Everything but Arms initiative.
  • zero duty for up to 7,200 different products, under GSP+ scheme – as long as it meets certain criteria for sustainable development and good governance

Under EU graduation rules, Bangladesh could lose the GSP treatment for any product that becomes competitive on the EU market (and so no longer needs GSP help).

Legal basis

GSP Regulation 732/2008

Guidelines on how to apply the tariffs – Communication COM (2004)461.

Investment

Investment by European companies in Bangladesh offers the following advantages:

  • creates new jobs and improves the local skills base
  • helps improve working conditions, e.g. by introducing policies like corporate social responsibility and responsible business conduct
  • brings advanced technologies, products, services and business practices
  • raises the level of Bangladeshi production, helping it compete internationally
  • diversifies Bangladesh’s economy, reducing its vulnerability to shocks.

To encourage European exports and investment, the EU and the Bangladesh government meet regularly in the form of the EU-Bangladesh Business Climate Dialogue.

EU interests in these meetings are represented through the EU Business Council in Bangladesh, which advocates for EU firms locally.

The Council comprises both diplomatic (EU Delegation and EU countries' individual diplomatic missions) and business representatives, including EU countries' Chambers of Commerce in Bangladesh.

Dialogue meetings

  • May 2016 Dialogue meeting
    Discussed 5 important areas: import duties/custom/trade facilitation, licenses and investment in services sector, financial flows, tax regime and pharmaceuticals.

Contact person:

Abu-Syed BELAL
Trade Advisor
Tel: +880 2 5566 8057 ext. 119 

Workplace safety

In response to the Rana Plaza tragedy, in July 2013 the EU jointly created the Sustainability Compact, together with the ILO and the US and Bangladeshi governments, which will run until 2018.

The goal is to help the Bangladeshi garment industry improve workplace safety, labour rights and general business conduct – by opening a dialogue with stakeholders, including trade unions, employers, buyers and NGOs, in both the EU and Bangladesh.

Results

The Compact has brought tangible progress in workplace safety and working conditions in the industry. A number of labour rights are better protected in Bangladesh today than they were when the Rana Plaza tragedy happened.

Related measures

Other action in this area by the EU and its member countries includes:

  • the Accord on Fire and Building Safety in Bangladesh, an initiative by leading EU brands and retailers sourcing Bangladeshi garments.
  • low-cost loans from France, Germany and the EU, to help small/mid-sized firms invest in factory safety improvements.

Monitoring

The EU monitors the Compact jointly with the ILO, involving regular meetings (October 2014, January 2016). The next meeting is scheduled in 2017.

In Dhaka, a high-level group – the 3+5+1 – also regularly reviews progress with the Compact.

Status report for the Compact – July 2016

ILO page on the Compact

ILO-IFC report on financing for safety improvements (2016) 

EU development assistance – around €500 million in 2015, including bilateral aid from EU countries – focuses on:

  • social services (health & education)
  • trade and private sector development
  • governance
  • food security
  • environment & climate change
  • disaster risk reduction.

Main funding – under the EU’s Development Cooperation Instrument (DCI).

Additional EU funding

  • specific budget lines (food security, human rights, non-state actors, climate change, empowerment of women, etc.).
  • regional funding for Asia, for example through the SWITCH Asia programme.

Key strategy documents

EU-Bangladesh cooperation strategy (2014-20)

Bangladesh Poverty Reduction Strategy 

DCI funding is directed by multi-annual indicative programmes (MIPs) and annual action plans – all agreed and coordinated between the EU, the Bangladesh government, local stakeholders and other development partners.

Bilateral funding

Alongside EU assistance, some EU countries provide separate assistance to Bangladesh through their own bilateral arrangements:

  • Denmark – Danish International Development Agency (DANIDA)
  • Germany – GIZ and KfW
  • Netherlands – Royal Netherlands Embassy
  • Sweden – Swedish International Development Agency (SIDA)
  • United Kingdom – Department for International Development (DFID)

The EU's humanitarian arm, ECHO, supports the following in Bangladesh:

1. Disaster preparedness

For example building flood-resistant infrastructure and early warning systems.

2. Emergency response

In particular for tropical storms and heavy monsoon rains, which cause severe floods.

Support includes building transitional shelters, latrines and wells, providing food security and nutrition, as well as educational awareness surrounding water and sanitation. 

Specific interventions

  • Cyclone Mahasen, 2013 (livelihood assistance, shelter repairs)
  • Rohingya refugees in Cox's Bazar District (nutrition, health, water & sanitation)
  • Chittagong Hill Tracts (livelihood and food assistance). 

More on EU humanitarian aid for Bangladesh

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