A newly signed trade agreement between Bangladesh and the United States has sparked serious debate among economists and policymakers. Analysts warn that the deal could significantly reduce government revenue while also raising questions about fiscal stability and trade policy.

According to experts from the Centre for Policy Dialogue (CPD), the agreement known as the Agreement on Reciprocal Trade (ART) could lead to substantial losses in customs duties for Bangladesh. The issue is particularly important because the country is already struggling with revenue collection and preparing its national budget for the upcoming fiscal year.

Overview of the Bangladesh–US Trade Agreement

The recent agreement aims to strengthen trade relations between Bangladesh and the United States by reducing tariffs on imported goods. Under the deal, Bangladesh will provide duty-free access to thousands of US products entering its market.

Specifically, Bangladesh will grant immediate duty-free access to about 4,500 US product categories. In addition, tariffs on another 2,210 product categories will be gradually reduced or eliminated over the next five to ten years.

These tariff concessions are intended to encourage bilateral trade and deepen economic cooperation between the two countries. However, economists warn that the policy could also significantly reduce the government’s revenue from import duties.

Potential Revenue Loss for Bangladesh

One of the most significant concerns surrounding the agreement is the expected loss in customs revenue. According to CPD estimates, Bangladesh could lose around Tk 1,327 crore (approximately Tk 13.27 billion) in import duty revenue during the current fiscal year alone.

Currently, the government collects substantial revenue from import duties on US products. When these duties are removed or reduced under the new agreement, this revenue source will shrink considerably.

Economists say that the loss could further complicate Bangladesh’s fiscal situation, especially as the government already faces difficulties meeting its revenue targets.

Pressure on the National Budget

The timing of this potential revenue loss is particularly sensitive. Bangladesh is already experiencing a significant gap between its revenue targets and actual collections.

Government data shows that revenue growth reached only about 12.9 percent until January, far below the official target of 34.5 percent for the fiscal year. Achieving the target would require an extremely high growth rate in the remaining months, which economists consider unrealistic.

In addition, the government is currently dealing with a large revenue deficit of around Tk 60,000 crore, making fiscal management more challenging.

Because of weak revenue collection, the government has increasingly relied on bank borrowing to finance public expenditure, raising concerns about financial stability.

Risk of WTO Compliance Issues

Another major concern raised by economists is the agreement’s compatibility with international trade rules.

Granting unilateral duty-free market access to the United States may conflict with the rules of the World Trade Organization (WTO). Under WTO principles, member countries generally must extend similar trade benefits to other partners unless the arrangement is part of a recognized free trade agreement.

If other WTO members demand the same tariff concessions, Bangladesh could face even larger revenue losses in the future.

Possible Increase in Government Spending

The trade agreement may also increase government expenditure.

Some provisions reportedly require Bangladesh to purchase certain products from the United States, which could limit flexibility in sourcing goods from cheaper suppliers.

Economists warn that if private businesses are expected to import more US products under the agreement, the government may need to offer subsidies or incentives. Without such incentives, companies might prefer buying from countries that offer lower prices.

This could add further financial pressure to the national budget.

Concerns About Economic Sovereignty

Experts have also raised concerns about the broader policy implications of the deal.

According to CPD analysts, some provisions could influence Bangladesh’s ability to make independent trade decisions, especially regarding sourcing products from third countries.

Economist Mustafizur Rahman noted that global trade is increasingly being used as a geopolitical tool, which can weaken the multilateral trading system and affect national policy flexibility.

For this reason, economists have called for greater transparency regarding the full details of the agreement.

Broader Economic Challenges

The debate over the trade deal comes at a time when Bangladesh’s economy is facing several challenges.

Inflation has remained above 8 percent, putting pressure on household spending and economic stability. At the same time, the implementation rate of the government’s Annual Development Programme (ADP) has dropped to 20.3 percent, the lowest level in about 15 years.

Trade performance has also shown mixed trends. Export earnings declined by about 3.2 percent, while imports increased by 3.9 percent, adding pressure to the trade balance.

These factors make the potential revenue loss from the US trade agreement even more significant.

Recommendations from Economists

Given the possible fiscal impact, economists have suggested several steps for policymakers:

• Reassess the full economic implications of the trade agreement
• Review the agreement in consultation with US trade officials if necessary
• Ensure transparency by publishing the details of the deal
• Adopt realistic revenue targets for the upcoming national budget
• Strengthen tax collection and improve the tax-to-GDP ratio

Experts emphasize that careful fiscal planning will be essential as Bangladesh prepares its next national budget.

In a Nutshell

The Bangladesh–US trade agreement represents an important development in bilateral economic relations. While the deal could strengthen trade cooperation and open new opportunities, it has also raised serious concerns about government revenue and fiscal stability.

With an estimated Tk 1,327 crore potential loss in customs duties, economists believe the agreement requires careful evaluation before full implementation. Policymakers must balance the benefits of deeper trade ties with the United States against the potential risks to Bangladesh’s budget and economic sovereignty.

As the government prepares its next fiscal budget, the debate over this trade deal will likely remain a key issue in shaping the country’s economic policy.