Bangladesh’s bid to join the Regional Comprehensive Economic Partnership (RCEP) has moved into a formal accession process, giving their $38 billion readymade garment (RMG) industry a potential new tariff shield as the country prepares to graduate from Least Developed Country (LDC) status.

Trade ministers at the fifth RCEP Ministerial Meeting in Manila authorised an ad hoc working group to examine the accession applications of Bangladesh, Chile, Sri Lanka and Hong Kong. For Dhaka, the move is commercially significant: the withdrawal of LDC preferences threatens to expose garments to materially higher import duties across key markets.

Tariff cliff looms

Bangladesh currently benefits from duty-free or preferential access in several major markets. After graduation, those concessions will progressively weaken, leaving exporters exposed to MFN tariffs.

Table: Post-LDC trade tariff impact & RCEP opportunities across markets

RCEP links the 10 ASEAN economies with China, Japan, South Korea, Australia and New Zealand, which is roughly 30 per cent of global GDP. Accession would therefore give Bangladesh a preferential platform across major Asia-Pacific consumer markets even as access conditions in Western markets become more challenging.

$5 billion export headroom

A feasibility assessment by Bangladesh’s Ministry of Commerce estimates that full RCEP integration could lift the country’s exports by 17.3 per cent, which is about $5 billion in additional shipments. The opportunity is particularly pronounced because Bangladesh remains a marginal supplier to the bloc. Research and Policy Integration for Development (RAPID) data shows RCEP members imported only $4.34 billion of Bangladeshi merchandise, accounting for just 0.08 per cent of their combined import basket.

The trade relationship, however, is already deep on the import side. RCEP members account for over 43 per cent of Bangladesh’s total imports, supplying cotton, synthetic filaments, chemical dyes, machinery and other industrial inputs. That imbalance makes accession strategically important but also politically difficult.

Cumulation could unlock synthetics

One of the biggest constraints on Bangladesh’s apparel diversification is its dependence on imported man-made fibres and fabrics. Local spinning capacity meets more than 80 per cent of knitwear requirements, but woven apparel, activewear and technical garments remain heavily dependent on synthetic inputs from East Asia. RCEP’s regional cumulation rules could change that equation. Inputs sourced from member economies can count toward originating content when garments are cut, stitched and finished in Bangladesh.

That would allow manufacturers to use Chinese polyester or Japanese nylon while still qualifying for preferential treatment when exporting finished apparel within the bloc. The result could be a faster shift from cotton-heavy exports into synthetic outerwear, sportswear and performance apparel.

Vietnam, China and India in focus

The competitive implications are significant. Vietnam already benefits from RCEP membership, strong man-made-fibre capabilities and multiple trade agreements, giving its exporters an established position in Japan and South Korea. Bangladesh could narrow that disadvantage through equivalent tariff treatment while retaining its labour-cost advantage.

They could also capture orders moving out of China as rising wages and industrial restructuring push Chinese manufacturers further upstream into synthetic fibre, fabric, dyeing and machinery production. Regional cumulation would allow Bangladeshi factories to process Chinese intermediate inputs into finished garments without losing preferential access. India's decision to remain outside RCEP could offer another competitive opening, leaving Indian apparel exporters exposed to MFN tariffs in several Asia-Pacific markets.

Revenue costs complicate accession

The gains will come with a sizeable domestic adjustment. RCEP accession requires approval from all 15 existing members and would oblige Bangladesh to progressively reduce protective customs duties, supplementary taxes and other import barriers.

The National Board of Revenue estimates potential annual fiscal losses of more than $1 billion as tariffs on capital goods, industrial inputs and consumer products from China and ASEAN economies decline. The exposure could also intensify competition for domestic light engineering, footwear and primary textile producers. As RAPID Chairman Abdur Razzaque points out accession would require sustained diplomatic and technical work because every existing RCEP member must agree to Bangladesh’s entry. “Bangladesh will have to undertake dedicated diplomatic and technical efforts,” he opines, stressing that even one member’s objection could block accession.

Industry already repositioning

The private sector is beginning to prepare for this more integrated trading environment. DBL Group, a major composite garment manufacturer supplying brands including H&M, Walmart and Marks & Spencer, is investing in automated synthetic knitting, technical dyeing and activewear.

Such investments could become more commercially attractive if RCEP accession enables Bangladeshi factories to combine imported Asian synthetic inputs with domestic manufacturing and then export finished garments at zero or preferential tariffs. The Bangladesh Garment Manufacturers and Exporters Association (BGMEA), established in 1983 with over 2,200 active export factories, is similarly pushing man-made-fibre conversion, automation and trade agreements as part of its strategy to build a $100 billion garment industry.

For Bangladesh, RCEP is therefore more than a tariff negotiation. It is becoming a potential mechanism to diversify its fibre base, deepen Asian supply-chain integration and offset part of the competitive shock created by the end of LDC preferences.