Written by:
AKM SAYEDAD HOSSAIN
Executive Director
National Institute of Global Studies (NIGS),
A Bangladesh-based think tank
https://nationalinstituteofglobalstudies.com
Introduction
Bangladesh, one of the fastest-growing economies in South Asia, has made remarkable progress in industrialization, export diversification, and economic stability. The country’s strategic location, a large workforce, and a rapidly expanding manufacturing sector make it an attractive destination for foreign investment. Among its key economic partners, the United States plays a crucial role in shaping Bangladesh’s economic trajectory through trade policies, investments, and bilateral agreements.
This article explores how U.S. investments and trade partnerships impact Bangladesh’s economic growth, the challenges in the current trade relationship, and the opportunities for deeper economic collaboration.
U.S.-Bangladesh Trade Relations: An Overview
The United States is one of Bangladesh’s largest export destinations and a significant source of foreign direct investment (FDI). Trade between the two countries has expanded steadily over the years, with Bangladesh enjoying a trade surplus.
Key Trade Statistics:
- Exports to the U.S. (2023): Over $10 billion, with garments, textiles, and footwear as the leading sectors.
- Imports from the U.S.: Around $2 billion, primarily in agricultural products, machinery, and technology.
- U.S. FDI in Bangladesh: More than $4 billion, with major investments in energy, telecommunications, and manufacturing.
Despite strong trade ties, challenges such as high tariffs, regulatory barriers, and the suspension of the Generalized System of Preferences (GSP) have hindered further trade expansion.
The Role of U.S. Investments in Bangladesh’s Economic Growth
1. Investments in Energy and Infrastructure
U.S. companies have played a crucial role in Bangladesh’s energy sector, ensuring energy security and supporting industrialization.
- Chevron, the largest U.S. investor in Bangladesh, supplies over 50% of the country’s natural gas.
- U.S. investments in renewable energy, such as solar and wind projects, are helping Bangladesh transition toward sustainable energy solutions.
- The U.S. International Development Finance Corporation (DFC) has invested in infrastructure projects, including roads, ports, and power plants, which are vital for industrial growth.
2. U.S. Investment in Technology and Digital Economy
Bangladesh’s IT and technology sector has emerged as a new area of U.S. investment.
- Microsoft, Google, and Meta have shown interest in Bangladesh’s growing digital economy.
- Call centers and IT outsourcing firms are benefiting from U.S. investments, creating employment opportunities.
- The U.S.-Bangladesh ICT partnership aims to strengthen digital infrastructure and cybersecurity.
3. Boosting the Manufacturing Sector
The U.S.-Bangladesh Business Council (USBBC) promotes investment in Bangladesh’s manufacturing sector beyond the ready-made garment (RMG) industry.
- Investment in electronics, pharmaceuticals, and automobile assembly is increasing.
- U.S. investors are exploring opportunities in Bangladesh’s Economic Zones (EZs), which offer tax incentives and improved infrastructure.
These investments contribute to industrial diversification and enhance Bangladesh’s export competitiveness.
Impact of U.S. Trade Policies on Bangladesh’s Economy
1. The Suspension of GSP Benefits
The suspension of Bangladesh’s GSP (Generalized System of Preferences) status by the U.S. in 2013 over labor rights and factory safety concerns remains a major challenge.
- While garments were never covered under GSP, the suspension affects other sectors like leather goods and ceramics.
- Bangladesh has made significant labor reforms, but reinstating GSP remains uncertain.
- Restoring GSP could diversify Bangladesh’s exports beyond RMG and boost small industries.
2. High Tariffs on Bangladeshi Exports
Bangladesh faces an average tariff of 15.6% on apparel exports to the U.S., compared to zero tariffs for competitors like Vietnam under trade agreements.
- A U.S.-Bangladesh Free Trade Agreement (FTA) could make Bangladeshi exports more competitive.
- Lobbying for trade preferences under the Developing Countries Trade Act could help reduce tariffs.
3. The Indo-Pacific Economic Framework (IPEF) and Bangladesh
The Indo-Pacific Economic Framework (IPEF), launched by the U.S., seeks to establish a regional economic network. Bangladesh has not yet joined, but participation could:
- Strengthen trade and investment relations with the U.S.
- Improve supply chain resilience and technology access.
- Open doors for enhanced cooperation in labor rights and environmental standards.
Opportunities for Strengthening U.S.-Bangladesh Economic Cooperation
1. Diversification of Bangladesh’s Export Basket
Beyond RMG, the U.S. could support exports of IT services, pharmaceuticals, jute, and processed food.
- Bangladesh’s pharmaceutical industry is growing, and FDA approvals for Bangladeshi firms could enhance exports to the U.S.
- The Bangladesh Tech Hub initiative can promote IT collaboration between U.S. and Bangladeshi firms.
2. Sustainable Investment and Green Economy
U.S. companies can help Bangladesh transition to a green economy by investing in:
- Renewable energy projects, including solar and wind farms.
- Sustainable garment production, ensuring compliance with U.S. standards on carbon emissions.
3. Improving Trade Facilitation and Logistics
- The U.S. can invest in Bangladesh’s port modernization, reducing export costs and improving efficiency.
- Enhancing customs and digital trade infrastructure can speed up trade processes.
4. Bilateral Investment Treaty (BIT) Negotiation
A Bilateral Investment Treaty (BIT) between the U.S. and Bangladesh could:
- Provide investor protections and encourage more FDI.
- Help Bangladesh attract U.S. firms looking to diversify supply chains away from China.
Challenges in U.S.-Bangladesh Economic Relations
Despite the strong trade relationship, several challenges remain:
- Regulatory Barriers: Complex customs procedures and bureaucratic delays hinder trade expansion.
- Political Uncertainty: Bangladesh’s evolving political landscape impacts long-term investment decisions.
- Human Rights and Labor Standards: The U.S. continues to monitor Bangladesh’s labor rights situation, affecting trade negotiations.
- Global Economic Slowdown: Inflation and supply chain disruptions could impact trade growth.
Conclusion: A Path Forward for Stronger Economic Ties
Bangladesh’s economic future is closely tied to its ability to strengthen trade and investment ties with the U.S.. To maximize benefits, both countries should:
✅ Negotiate lower tariffs and explore trade agreements.
✅ Expand U.S. investments in non-RMG sectors like ICT, pharmaceuticals, and energy.
✅ Enhance infrastructure and supply chain resilience to attract U.S. businesses.
✅ Continue labor and environmental reforms to meet U.S. trade standards.
By fostering a more strategic economic partnership, Bangladesh and the U.S. can unlock new opportunities for growth, industrialization, and mutual prosperity.
