India loses ground: Bangladesh inks confidential cotton deal with US

Dhaka (The Uttam Hindu): Amid the general elections being held in Bangladesh today i.e. Thursday, a big news has created a stir in the diplomatic and business circles. Giving a big economic blow to India, the head of the interim government of Bangladesh, Mohammad Yunus, has decided to purchase cotton for the textile industry from America instead of India. Just three days before the elections, on February 9, the Yunus government has signed an important bilateral trade agreement with America, under which Bangladesh will now become the major buyer of American cotton.

Agreement reached in secret, claims of 'game changer'

Muhammad Yunus's government kept this agreement highly confidential and its draft was not shared with anyone, which has raised questions about its transparency. However, in an interview, Shafiqul Alam, press secretary to the Chief Advisor, described this agreement as a "game changer" for the Bangladeshi economy. Under the agreement, the US has reduced the tariff on Bangladeshi clothing by one percent, bringing it to 19%. This rate is now equal to that of competing countries like Cambodia and Indonesia. The most important condition is that if Bangladesh manufactures its clothing from American cotton or man-made fibers, then no tariff will be imposed on it in the US, meaning it will be able to sell the goods at 'zero duty'.

Relations have deteriorated since Sheikh Hasina's coup

This decision is being seen as a result of rising tensions between India and Bangladesh. Relations between the two countries soured after Sheikh Hasina's overthrow on August 5, 2024, and India's granting of asylum to her. In 2024, India sold cotton yarn worth $1.6 billion to Bangladesh, but the soured relations affected trade. Tensions escalated to the point where, on April 13, 2025, Bangladesh banned land imports of Indian cotton. In response, India also blocked land imports of Bangladeshi readymade garments from May 16, 2025. Now, this deal with the United States has virtually closed the doors to a major market for India.

Distance and quality became a big challenge

While the Yunus government is hailing this as a major achievement, economists have pointed out significant challenges along the way. Professor Salim Jahan, a leading economist at BRICS University, warns that the US is geographically distant from Bangladesh, which could significantly increase shipping charges for importing cotton from there. This could negate the benefits of tariff exemptions. Furthermore, quality is also a major issue. Cotton quality is crucial in the textile sector. Experts say that Indian and Egyptian cotton are considered the best quality. If American cotton fails to meet those standards, American buyers may reject Bangladeshi-made clothing.