EU halts Dhaka talks. Is it a bad omen?

The European Union’s (EU) postponement of the first round of negotiations with Bangladesh on a new agreement will impact trade, investment and development cooperation with the country’s largest trading partner.
“In light of the prevailing situation, the first round of negotiations on the Partnership and Cooperation Agreement envisaged for September has been postponed with no later date fixed as yet,” Nabila Massrali, EU spokesperson for Foreign Affairs and Security Policy, told The Daily Star in a message on July 31.
The decision comes after EU High Representative and Foreign Policy Chief Josep Borrell on Tuesday issued a statement condemning a “shoot-on-sight policy” announced by Awami League general secretary centring the quota reform protest.
In the statement, Borrell also expressed grave concern over unlawful killings perpetrated in recent days by the authorities in Bangladesh. He called for thoroughly investigating the killings and bringing those responsible to justice.
Many important issues are pending for negotiations with the EU.
This includes negotiations for obtaining lower tariffs on exports to the EU under a Generalised Scheme of Preferences (GSP) Plus scheme.
Bangladesh’s eligibility for a current GSP will expire once it makes the United Nations country status graduation from a least developed to a developing nation in November 2026.
Moreover, issues over trade and development cooperation policies, investment, Rules of Origin (RoO) or the criteria for determining the national source of products and business climate and dialogues are pending with the largest trade bloc of the world.
“The relationship of Bangladesh with the EU is multifaceted,” said Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue.
A negative impact on economic cooperation may come about if the current situation is not improved and negotiations initiated soon, said Rahman, also a noted economist and trade analyst.
Bangladesh must take into consideration the EU’s concern over the country’s current situation because the EU is the main export destination of the country, he said.
Bangladesh exported more than $24 billion worth of goods to the EU in 2023. This is 58 percent of Bangladesh’s total export, according to the Export Promotion Bureau.
The postponement sends a negative signal to Bangladesh because the EU has been a very good friendly development partner since the country gained independence, said Rahman.
The next important issue is the negotiations on being eligible for the GSP Plus scheme. However, the negotiations will be delayed if the EU is not satisfied with the current situation of the country, he said.
Obtaining concessional loans and determining the RoO for Bangladesh will also be affected because of the postponement, he added.
Bangladesh has been enjoying duty-free trade benefits since 1975 under the EU’s generous Everything but Arms (EBA) scheme.
Enjoying such preferential trade benefits, Bangladesh has eventually turned into a key trading partner to become the third largest exporter to this trade bloc of 27 countries.
In fact, Bangladesh is the largest garment supplier to the EU in terms of volume, overtaking China.
The country is also the largest denim supplier to the EU. It is estimated that one in every three persons in the EU wear denim trousers made in Bangladesh.
The EU has already informed that its rules would allow Bangladesh to be eligible for the existing trade benefits for three years past the country status graduation, meaning till 2029.
But after that, Bangladesh will face a 12.5 percent duty if it fails to come under the GSP Plus scheme fulfilling the EU’s conditions over 32 international conventions, including four core ones on labour, human rights, good governance and environmental protection.
Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development, echoed Rahman’s views.
Investors and buyers in the EU, dealing with billions of dollars of investment and trade, are in the dark over their next course of action for the tension surrounding the postponement of negotiations, he said.
It is expected that the government will handle the situation with the EU diplomatically and politically as the bloc matters a lot for Bangladesh, said Faruque Hassan, former president of the Bangladesh Garment Manufacturers and Exporters Association.
Businesspeople will also talk with the government to give advice so that the relationship with the EU does not deteriorate further, he said.