The United States has a $6 billion trade deficit with Bangladesh. To reduce this gap, Bangladesh has made several commitments under a reciprocal tariff agreement, including the purchase of wheat, soybeans, cotton, and aircraft from the U.S. Following these assurances, Japan and several other countries have moved to seek similar benefits. Most recently, the European Union (EU) has begun efforts to establish trade parity with Bangladesh. To this end, the EU Delegation in Bangladesh has sent a letter to the Ministry of Commerce, seeking to bring Bangladesh to the negotiating table to ensure fairness in trade and investment relations.
According to sources at the Ministry of Commerce and the EU Delegation in Dhaka, the EU office sent a letter in September addressed to Sk Bashir Uddin, adviser to the Ministry of Commerce. The letter included a list of challenges related to Bangladesh-EU trade and investment relations. It identified 13 key obstacles, including non-tariff and regulatory barriers, that the EU stated were affecting the long-term and deep economic ties between the two sides.
The Ministry of Commerce said discussions with relevant stakeholders were completed last week regarding the issues raised in the EU’s letter. Several decisions have been taken to address those challenges, and the ministry will soon issue written instructions to the concerned parties.
According to Bonik Barta’s investigation, the EU’s move follows the pattern set by the U.S. Trump administration, which had previously brought Bangladesh to the negotiating table over trade deficits and barriers. Similarly, the EU has now outlined its own set of concerns for Bangladesh to address.
Officials linked to EU affairs in Bangladesh said that the government has already implemented a series of measures under its reciprocal tariff agreement with the United States. As a result, other major trading partners have started raising their own concerns. The EU’s position is that while Bangladesh is offering major trade concessions to help the U.S. narrow its $6 billion deficit, the EU’s trade deficit with Bangladesh is nearly three times larger; amounting to 17 billion euros, or even higher in dollar terms. The EU now expects similar trade benefits or concessions to help reduce that imbalance.
An EU official, speaking to Bonik Barta on condition of anonymity, said, “We have shared a list of non-tariff barriers and other challenges with the government. The Trump administration earlier brought Bangladesh to the negotiating table over such trade deficits and barriers. In a similar approach, the EU has outlined its own set of concerns for Bangladesh to consider. Addressing these issues could help deepen bilateral trade relations.”
The official further noted that if Bangladesh considers the concerns raised in the letter, the European Union will interpret it as a sign that the country has begun preparations for a Free Trade Agreement (FTA). “If Bangladesh gives due importance to the issues the EU has raised, an FTA will become easier. In other words, as Bangladesh moves to resolve these challenges, it will create a favorable condition for an FTA,” the official added.
Sources said the EU plans to hold business forums by the end of next year with several countries, including Bangladesh. In line with the effort to strengthen bilateral trade and investment ties, the business forum in Bangladesh will also include private-sector participation. However, as the current interim government has a limited tenure, the EU will likely make the final decision on the forum after a new government takes office. Overall, the EU’s letter holds particular significance in the context of Bangladesh’s commitments under the reciprocal tariff agreement with the United States.
The letter sent by the EU Delegation to Bangladesh’s Ministry of Commerce outlines 13 major challenges, covering more than 50 specific issues. These include obstacles faced by companies from EU member states operating in different sectors in Bangladesh. Officials said that as the interim government is currently implementing a series of reform initiatives, addressing the issues faced by EU companies would make Bangladesh’s economic relationship with the EU even more meaningful.
Copies of the EU’s letter to the commerce ministry outlining 13 challenges were also sent to the chairman of the National Board of Revenue (NBR) and the executive chairman of the Bangladesh Investment Development Authority (BIDA). Bonik Barta has obtained a copy of the letter.
According to the letter, the 13 challenges identified by the EU are divided into two categories: the first five relate to non-tariff barriers, while the remaining eight concern regulatory, policy, and other structural issues.
The first challenge highlights the difficulty of renewing licenses for foreign-owned logistics companies operating in the service investment sector, which the EU described as a major obstacle. The letter also noted that the Bangladesh Flag Vessel (Protection of Interest) Act of 2019 and its related 2023 rules have imposed restrictions on foreign shipping operations. In addition, limitations on foreign entities’ access to customs houses, container freight stations (CFS), inland container depots (ICD), quality control (QC) facilities, and bonded warehouses have disrupted commercial activities. The EU further pointed out that import limits on product samples have made it difficult for many European companies to conduct preliminary testing before launching new products in Bangladesh.
The second challenge concerns customs and trade facilitation. The EU noted various complexities in these areas, including mis-valuation and misclassification of goods, incorrect classification of vehicles and hazardous materials, overvaluation of smart cards, and HS codes misclassification — all of which create uncertainty for European exporters. It also cited excessive procedural hurdles in temporary import and re-export processes, as well as inefficiencies in import declaration procedures.
According to the letter, lengthy customs clearance procedures, complex import registration systems, inconsistencies in value adjustments on bills of entry, and limited technological integration and poor coordination have led to opportunities for corruption, including growing allegations of bribery. The EU also identified significant delays in vessel berthing at Chattogram port as a major obstacle for exporters. Additional concerns include delays at rail-based inland container depots (ICDs), limited free storage facilities, excessive discretionary power of port officials, restricted roles for private operators, and informal costs. The EU informed the Bangladesh government that all of these issues have caused frustration among European importers.
In the letter, the European Union raised complaints on behalf of EU-based companies regarding government procurement in Bangladesh. It said that in many cases, Bangladeshi authorities require U.S.-based FDA certification instead of Europe’s CE marking, which is unnecessary and costly. The letter also cited informal expenses during tender processes, the mandatory use of local agents, risks of fraud, and delays in settling letters of credit — all of which, EU said, undermine transparency and fair competition in public procurement.
On agriculture, food, and dairy imports, the EU identified several complications faced by European companies in Bangladesh. As the fourth challenge, it said inconsistencies in fat-content standards for full cream milk powder, discriminatory import duties on powdered milk, as well as non-harmonized technical standards and complex certification process for food imports were making these sectors less competitive. In addition, non-recognition of test reports for food products and the mandatory requirement for radiation testing on some items further slow the import process down.
The fifth challenge concerns the pharmaceutical industry, where EU investors reportedly face long delays and cumbersome procedures for registering new products. The EU said companies also face barriers when registering second brands of drugs. It added that the government’s failure to grant administrative approval for importing originator biologic medicines and the lack of adherence to the International Federation of Pharmaceutical Manufacturers & Associations’ (IFPMA) code of conduct have reduced European companies’ confidence in the sector.
As the sixth challenge, the EU pointed to a lack of transparency and fair evaluation in the purchase of aircraft from Airbus and Boeing. The seventh challenge involved taxation policies at the import stage such as excessive minimum tax based on import value, non-refundable advance income tax (AIT), demanding high output VAT, and high AIT on quality imports, which, according to the EU’s letter, weakens the competitiveness of compliant businesses.
The eighth challenge addressed intellectual property rights and counterfeiting. The letter stated that enforcement of intellectual property rights (IPR) protection in Bangladesh is weak and that the spread of counterfeit and pirated goods poses risks to export markets. It also noted the absence of a formal seed certification and registration system discourages investment and innovation.
The ninth challenge outlined by the European Union focused on outward remittance and profit repatriation by European companies operating in Bangladesh. It adds that various restrictions imposed by Bangladesh Bank on foreign currency transactions create uncertainty for European investors. The letter also said restrictions are imposed on the repatriation of branch office profits, as well as on sending dividends and license fee remittances abroad. It also cited high taxes on foreign services remittances, LC payment disputes with local banks, and cases where LCs were refused confirmation due to blacklisted banks. According to the EU, administrative bottlenecks often delay the opening of letters of credit by multinational companies, while restrictions on intercompany loans from parent companies have negatively affected foreign investment flows.
On taxation, European businesses noted arbitrariness and lack of transparency in assessments, identifying this as the tenth challenge, with such irregularities exposing investors to financial uncertainty.
The eleventh challenge concerned double taxation. The EU said the Double Taxation Avoidance Agreements (DTAAs) signed with Bangladesh are not being properly implemented. It pointed out problems such as taxes imposed on service fees, double taxation on royalties, and the lack of a “fees for technical services (FTS)” clause in some DTAAs, which complicate business operations for EU companies.
Visa, work permit, and registration procedures were identified as the twelfth challenge. The EU said these processes are slow and complex for European nationals. It opaque regulatory environment, the absence of clear procedural guidance, slow and complex approval processes, and the annual renewal requirement for visas — all of which create frustration among investors.
The thirteenth challenge dealt with dispute resolution mechanisms. European investors highlighted the absence of an independent and neutral framework for commercial dispute settlement. The EU said the lack of a transparent, impartial, and time-efficient mechanism for resolving business disputes has made many European companies cautious about investing in Bangladesh.
According to the Ministry of Foreign Affairs (MoFA), Bangladesh and the European Union have been negotiating a Partnership and Cooperation Agreement (PCA) for the past two years, and the talks are now nearing completion. The agreement is meant to establish the legal framework for bilateral relations between Bangladesh and the EU, without including any specific provisions on market access. It focuses instead on mutual cooperation and commitments across various sectors. The next round of PCA negotiations is expected to take place later in November, though it has not yet been finalized. Meanwhile, Bangladesh has also begun preparing for a free trade agreement (FTA) with the EU.
When asked, Commerce Secretary Mahbubur Rahman told Bonik Barta, “The EU raised 13 points covering non-tariff barriers, regulatory, and other issues. Not all of them are strictly non-tariff barriers; many are procedural matters. For example, the delay in clearing goods at Chattogram Customs House is procedural, not a non-tariff issue. Excluding such procedural matters, we completed discussions with the relevant stakeholders last week. The decisions taken will be communicated in writing to the stakeholders within a day or two.”
Asked how he views other countries or blocs now seeking trade concessions following the U.S. agreement, the commerce secretary said, “We have not given concessions in areas with high revenue sensitivity. Some countries are asking for concessions based on assumptions. The U.S. didn’t get everything it wanted. We made sure our national interests were protected. Many of the concessions we did make are phased, with timelines of five or ten years. Such phased benefits could also be extended to others. No country has been or will be granted benefits that would severely hurt revenue. Nor did the U.S. receive any concession that others can cite as a reference.”
Data from the European Commission show that by the end of 2024, total trade between Bangladesh and the EU stood at €22.18 billion. Of this, Bangladesh exported €19.88 billion to the EU and imported €2.3 billion, leaving the EU with a trade deficit of over €17.57 billion. As of the end of 2023, the stock of foreign direct investment (FDI) from EU member states in Bangladesh totaled €2.1 billion.
Professor Suborna Barua, chairman of the Department of International Business at the University of Dhaka (DU), told Bonik Barta, “The European Union’s call in response to the multifaceted trade benefits extended to the United States is quite natural. The EU is Bangladesh’s largest export market. As Bangladesh moves into the post-LDC era, it is facing new trade conditions in the global market, particularly with the EU. For instance, after graduation, Bangladesh will no longer enjoy the “Everything but Arms (EBA)” scheme under the EU’s trade preferences. In this context, it is expected that the EU’s demands will be very high, and Bangladesh may have to offer significant benefits in return. Nevertheless, what we seek is a modern, balanced, and forward-looking trade and investment agreement that benefits both sides, where Bangladesh can secure advantages such as GSP Plus facilities or negotiate a new Free or Preferential Trade Agreement with the EU. Therefore, engaging at the negotiation table and jointly determining a fair and mutually beneficial framework would be the most constructive approach.”