Assignment on,

Trade negotiations between the European Union and Bangladesh

Submitted to,
Dr. Chowdhury Saima Ferdous
Professor
Department of International Business
University of Dhaka

Submitted by,
Kohinoor Akhter
ID: SK-030-054
Department of International Business
University of Dhaka

Submission date: 12th June, 2023

 Letter of Transmittal
15th January 2023
Dr. Chowdhury Saima Ferdous
Professor
Department of International Business
Faculty of Business studies
University of Dhaka

Subject: Submission of term paper on “Trade negotiations between the European Union
and Bangladesh”.

Dear Sir,
With all due honour and respect, I present the term paper titled “Trade negotiations
between the European Union and Bangladesh”. Though preparing this report was very
challenging, the study was very interesting, knowledgeable, and beneficial to me. I think
the knowledge which I gathered during this period will help me in the future. I have tried
my level best to follow my supervisor’s guidelines in every aspect of preparing this
report.
I also want to thank you for your support and patience with me. It would be a great
pleasure for me if this report will get your appreciation.

Sincerely Yours,
…………………
Kohinoor Akhter
ID NO: SK-054
Department of International Business
University of Dhaka

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Contents
Letter of Transmittal ..................................................................................................................ii

Abstract ....................................................................................................................................iiv

1.0. Introduction ......................................................................................................................... 1

1.1. Background of the study ................................................................................................. 1

1.2. Problem statement ........................................................................................................... 2

1.3. Objectives ....................................................................................................................... 2

1.4. Scope of the study ........................................................................................................... 2

1.5. Limitations of the study .................................................................................................. 3

2.0. Literature review ................................................................................................................. 3

3.0. Methodology ....................................................................................................................... 3

4.0. EU-Bangladesh trade negotiation ....................................................................................... 4

4.1. Key concepts of negotiation between Bangladesh and EU ............................................ 5

4.1. 1. EU’s BATNA analysis ........................................................................................... 5

4.1.2. Bangladesh’s BATNA analysis ............................................................................... 7

4.2.3. WATNA analysis for Bangladesh and EU .............................................................. 8

4.1.4. Resistance point for Bangladesh and EU ................................................................. 9

4.1.5. Zone of Possible Agreement (ZOPA) for Bangladesh and EU ............................... 9

4.2. EU’s power in the negotiation ...................................................................................... 10

4.3. Bangladesh’s power in the negotiation ......................................................................... 11

4.4. Bangladesh’s weaknesses in the negotiation ................................................................ 12

4.5. Why EU choose Bangladesh for RMG import over china or turkey ............................ 14

4.6. How to improve the negotiation situation between the two countries? ........................ 15

4.7. From distributive to integrative negotiation ................................................................. 17

4.8. Find the win-win result ................................................................................................. 18

5.0. Conclusion ........................................................................................................................ 20

6.0. References: ........................................................................................................................ 21

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 Abstract
The Ready-Made Garments (RMG) industry is used in this paper to analyse the trade
negotiation dynamics between Bangladesh and the European Union (EU). The study focuses
on important factors such the Best Alternative to a Negotiated Agreement (BATNA), Worst
Alternative to a Negotiated Agreement (WATNA), Reservation Price (RP), Zone of Possible
Agreement (ZOPA), and negotiation power, as well as the strengths, opportunities, and
problems encountered by both countries. The examination starts by looking at Bangladesh's
and the EU's BATNA and WATNA. It assesses the extra-negotiation options that are open to
each party and their potential effects on the RMG deal. The research also explores the role of
the RP, which stands for the minimum acceptable result for each party, in the negotiation
process. It provides insightful information on the forces at play throughout these negotiations.
Policymakers, industry stakeholders, and negotiators can use the findings to better their
efforts to promote win-win agreements and strengthen the RMG trade relationship between
Bangladesh and the EU.
Keywords: Bangladesh, BATNA, EU, Negotiation, RP, WATNA, ZOPA.

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1.0. Introduction
1.1. Background of the study
The European Union highlights the need for the Bangladeshi government to keep its
commitments and guarantee that its obligations under international law are upheld in support
of the government's reform agenda. The environment, human rights, good governance, and
economic development are the primary areas where the EU supports Bangladesh. Without
taking into account Thematic and Regional grants, the EU has committed up to €690 million
in aid to Bangladesh during the course of its Multiannual Indicative Programme for Bangladesh
2014-2020.

Bangladesh's top trading partner, accounting for 24% of all commerce, is the European Union.
Bangladesh is the 35th-largest trading partner for the union. 90% of Bangladesh's total exports
to the EU are made up of clothing. Machinery and transport equipment account for 49 percent
of EU exports. Bangladesh has the most advantageous regime under the EU's Generalised
Scheme of Preferences (GSP), known as the Everything but Arms (EBA) arrangement, as a
Least Developed Country (LDC). EBA provides duty-free, quota-free access to the EU for
exports of all goods, with the exception of armaments and ammunition, to the 46 LDCs,
including Bangladesh. The EU launched a Sustainability Compact for Bangladesh in July 2013
in reaction to the collapse of the Rana Plaza manufacturing complex, which resulted in the
deaths of several workers. The Compact aims to improve factory safety and labour rights in the
ready-made garment sector. The project brings together the International Labour Organisation
(ILO), the EU, the Government of Bangladesh, the USA, and Canada—i.e., the major markets
for Bangladeshi garment manufacture.

As a least developed country (LDC), Bangladesh has benefited from the finest Generalised
Scheme of Preferences of the European Union programmes with zero tariffs. One of the nations
to make use of the EU's preferred market access is Bangladesh. Therefore, following LDC
graduation, Bangladesh must maintain its tariff preference in all significant markets, but
especially in the EU market. The country's exports would increase if favourable tariffs were
used to maintain export competitiveness. As a result, there would be more manufacturing, more
export revenue, more employment opportunities for women, and ultimately less poverty. But
recently EU has changed its safeguard measured in its new GSP regulation. It mentions that

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Bangladesh might be subject to most-favoured-nation (MFN) tariffs and the loss of zero-duty
advantages for its garment products on the EU market if the proposed regulations are left in
place. The EU has received a concern from Euro Commerce, a platform that represents more
than 5 million businesses in the European retail and wholesale sector, regarding a specific
article of the proposed new GSP regulation for the period after 2023 that deals with the
automatic safeguards that are applied to textile and ready-made garment (RMG) products
(Karim, 2023).
In this report the impact of EU regulations on Bangladesh RMG export and how the EU-
Bangladesh negation over RMG is conducted time to time will be explored.

1.2. Problem statement

A large percentage of Bangladesh's export revenue comes from the ready-made clothing
(RMG) sector, which also offers millions of worker’s employment opportunities. Since the
European Union (EU) is one of Bangladesh's main commercial partners, trade negotiations
between the two parties are essential to achieving mutually beneficial results.
However, there are many obstacles in the way of the Bangladesh-EU RMG trade talks that
must be successfully overcome. The purpose of this paper is to identify and evaluate these
difficulties while looking into new avenues for improving bilateral economic relations.

1.3. Objectives
The main objective of the report is to understand the negotiation situation between EU and
Bangladesh in RMG sector. Other objectives are:
 To explore the negotiation concepts from the perspective of both countries
 To understand the negotiation type and the power of both countries in negotiation
 How to improve the negotiation situation for the countries?

1.4. Scope of the study

The report discusses the RMG sector trade negotiations between Bangladesh and the EU. As
Bangladesh's main commercial partner, the EU helps Bangladesh export its goods, but it places
several trade restrictions on its own imports for nations other than the least developed.
Bangladesh is a least developed country; hence it is exempt from certain restrictions. However,
the EU has amended the GSP rules, and Bangladesh might not be able to take advantage of the
new trade facility due to the potential of its LDC graduation. This study focuses on the

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negotiating style and attempts to investigate the impact of various external trade factors on the
negotiation between the two countries.

1.5. Limitations of the study

There are several limitations of this report. This study only focuses on the RMG sectors to
understand the trade relation between Bangladesh and EU. To understand the negotiation style
and type between the countries the report uses mostly secondary data and uses internet sources.

2.0. Literature review

According to a news of The Business Standard the European Union (EU) imported 35.69%
more clothing from Bangladesh in 2022 than it did in 2021 (March & Report, 2023).
Bangladesh have to pay tariff in the EU market because of its LDC graduation and because of
the new rule of EU Generalised Scheme of Preferences (GSP). According to Rahman (2019),
the RMG industry in Bangladesh will be most impacted by Bangladesh's LDC graduation. This,
according to him, will result from the heavy due to the concentration of RMG in Bangladesh's
exports as well as the characteristics of "tariff-peaks" in Bangladesh's major markets. After the
current duty-free-quota-free benefits are compromised, it is predicted that Bangladesh will see
an incremental tariff of 6.5% on average. Similarly, Bangladesh will pay increased tariffs of
8.7%, 3.9%, and 7.3% in the EU, non-EU, and Canada, respectively (Rahman, 2019).
In the words of Razzaque and Rahman (2019), duty- and quota-free market access is
advantageous under the EBA. They underline that because of the cost savings from reduced
tariffs, Bangladesh enjoys a significant competitive edge in these activities. Upon graduation,
these benefits will be revoked, and Bangladesh will be required to pay GSP rates (Razzaque
and Rahman, 2019).
This paper will try to explore how Bangladesh is losing power and DFQF facility in
international market especially in the European market because of its LDC graduation and other
issues. And the negotiation situation for Bangladesh with EU will be analysed briefly.

3.0. Methodology
For this qualitative research, data collection will be based on secondary sources and literature
reviews. This approach is appropriate for this research as it allows for a comprehensive analysis
of the existing literature on the subject, and provides a thorough understanding of the RMG
trade negotiation between Bangladesh and the EU.

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The literature sources for this research will be selected based on their relevance and reliability.
The sources will be primarily academic journals, books, and reports from reputable
organizations such as the World Trade Organization (WTO) and the International Labour
Organization (ILO). The selected literature will provide a comprehensive understanding of the
RMG trade negotiation between Bangladesh and the EU, including the history, current state,
and future prospects. The analysis of the literature sources will be based on a thematic
approach, where the themes will be identified based on the research questions and objectives.
The analysis will provide insights into the key issues, challenges, and opportunities related to
the RMG trade negotiation between Bangladesh and the EU.

4.0. EU-Bangladesh trade negotiation

Enhancing bilateral trade ties, removing trade obstacles, and advancing ethical and sustainable
trade practices are the main goals of trade negotiations between Bangladesh and the European
Union (EU). Following are a few crucial details of the trade negotiations:

Market Access: Improving Bangladeshi products' access to the EU market is one of the main
goals of the negotiations. Discussions about removing tariffs, quotas, and non-tariff barriers
that can limit Bangladeshi exports are part of this. Since joining the WTO in 1995, Bangladesh
has benefited from the EU's "Everything but Arms" agreement, which gives duty-free and
quota-free access for all exports except for those of arms and ammunition.

Standards and Regulations: For access to the EU market, compliance with standards and
rules is essential. The goal of negotiations may be to bring Bangladeshi norms into compliance
with EU standards, especially in areas like product safety, labelling, and certification.
Bangladesh cannot avoid strengthening and strictly enforcing domestic laws, regulations, and
standards pertaining to intellectual property, e-commerce, and public procurement (Uddin,
2023).

Labour and Social Standards: In its trade agreements, the EU prioritizes social norms and
labour rights. Discussions about bettering working conditions, ensuring fair pay, and fostering
social sustainability in Bangladesh's export industries may come up during negotiations.
Countries must sign and ratify 27 international agreements relating to labour and human rights,

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environmental and climate protection, and good governance in order to be eligible for GSP+.
The European Union has threatened to cancel our GSP status on a few different times. This is
as a result of claims that our clothing business does not adhere to labour and human rights
requirements established by the International Labour Organization (ILO) (Uddin, 2023). So, a
negotiation topic arises here for the countries.

It's important to keep in mind that trade negotiations' specifics and status can change over time.

4.1. Key concepts of negotiation between Bangladesh and EU

To understand negotiation between the EU and Bangladesh detailed analysis is needed about
their BATNA, WATNA, RP, and ZOPA. Here all the concepts of negotiation are explained
from the EU-Bangladesh perspective:

4.1. 1. EU’s BATNA analysis

BATNA stands for "Best Alternative to a Negotiated Agreement," and it is a concept used in
negotiation scenarios. In the context of RMG import by the European Union (EU), the term
BATNA doesn't directly apply. However, the European Union (EU) has several alternatives
for importing Ready-Made Garments (RMG) besides Bangladesh. Here are a few countries
that are known for their garment manufacturing industries:

(a) China: according to news of The Daily Star, Bangladesh maintained its position as the
EU's second-largest garment supplier after China, which accounts for 29.39% of all clothing
imports from 27 nations (Mirdha, 2023). The data reveals that during the first ten months of
2017, the EU's imports from China totalled $25.49 billion, growing by 22.43 percent from the
same period the previous year. So other than Bangladesh china is the best option for the EU.

(b) Turkey: Turkey has a well-established textile and clothing industry. It offers a diverse
range of garment products and has a skilled workforce. Its proximity to Europe allows for
shorter lead times and easier logistics. During the first 10 months of last year, EU’s imports
from Turkey grew 12.82 per cent to stand at $10.12 billion (Mirdha, 2023). So Turkey is
another best alternative to EU in RMG import. In the EU-Bangladesh negotiation Turkey is a
mentionable BATNA for EU with high potentiality.

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(c) Vietnam: Vietnam has become a major player in the global garment industry. It boasts
competitive labour costs, favourable trade agreements (such as the EU-Vietnam Free Trade
Agreement), and has made significant investments in manufacturing infrastructure. As bilateral
trade increased following the Free Trade Agreement (FTA), the import of clothing by the
European Union (EU) from Vietnam has shown an upward trend in recent quarters. Analysis
reveals that the EU's imports of clothing from Vietnam could not surpass the pre-FTA level,
nonetheless. Midway through 2019, the European Union and Vietnam concluded an FTA,
which became effective in August 2020.

(d) India: India has a long history of textile production and is one of the world's largest
manufacturers of textiles and garments. It offers a wide variety of products and has a skilled
workforce. India also benefits from preferential trade agreements with the EU. The European
Union has always been a prospective market for the Indian garment export industry, and for
good reason—the Union's total apparel market is worth more than US$350 billion. However,
India's export of clothing to the EU is not at all encouraging when compared to nearby nations
like Bangladesh, and COVID-19 has further significantly reduced export values (Varshney &
Varshney, 2021).

(e) Cambodia: Cambodia has been a popular sourcing destination due to its low labour costs.
It enjoys duty-free and quota-free access to the EU market under the "Everything but Arms"
initiative, making it an attractive option for RMG imports. The primary things that Cambodia
exports to the EU are agricultural goods, including milled rice, textiles, footwear, travel
accessories, and bicycles. The main goods that Cambodia imports from the EU are, among
others, building supplies, food and drink, electronics, and pharmaceuticals. According to a
report of The Financial Express, the suspension of the European GSP facility is anticipated to
enhance export orders for Bangladesh in the EU market by Cambodia's ready-made garment
(RMG) exporters. So, Cambodia can also be a best alternative for EU in terms of negotiation.

(f) Morocco: Morocco has been gaining attention as a strategic sourcing location for fast
fashion due to its geographical proximity to Europe and free trade agreements such as the Euro-
Mediterranean Agreement. The country has invested in modernizing its textile industry and
offers competitive prices.

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(g) Indonesia: Indonesia has a growing textile and garment sector. It offers a range of products
and has a large labour force. The country's strategic location in Southeast Asia makes it
accessible to the EU market.
These alternatives offer different advantages and considerations in terms of cost, quality, trade
agreements, and logistical factors. The EU can explore these options based on their specific
requirements and priorities. When considering alternatives to Bangladesh for RMG imports,
factors such as cost, quality, production capacity, lead time, compliance with labour and
environmental standards, and trade agreements should be taken into account.

4.1.2. Bangladesh’s BATNA analysis

In the trade negotiation between Bangladesh and EU, Bangladesh has USA as its best
alternative. As Bangladesh’s second RMG export partner, the USA is its best alternative to the
negotiated agreement with EU. In 2022, Bangladesh's apparel exports to the EU and the USA
totalled USD 23040.35 million and USD 9059.94 million, respectively, according to BGMEA.
The USA is Bangladesh's best alternative to a negotiated agreement with the EU, followed by
the UK, according to the BGMEA's list. In 2022, despite the instability in the world economy,
Bangladesh's exports of apparel and textiles to the US surpassed $10 billion as the US
transferred a sizeable portion of its trade away from China, according to New Age.

The United States imported $10.04 billion worth of garments and textiles from Bangladesh in
2022, up 35.38 percent from the $7.42 billion in 2021, according to the most recent figures
from the Office of Textiles and garments of the US Department of Commerce, which were
made public on 7th February, 2023. According to Mahmud Hasan Khan Babu, managing
director of Rising Group, Bangladesh's share of the US apparel market would grow more over
the next few days as western consumers continue to switch from China. According to the
OTEXA data, Bangladesh maintained its third-place ranking as the top exporter of garments to
the US market with a 9.75 percent share, while China and Vietnam held the top two spots with
respective shares of 21.75 and 18.26 percent.

On the other hand, following its exit from the European Union, the UK will replace the
Generalized Scheme of Preferences (GSP) with the Developing Countries Trading Scheme,
which will offer lower tariffs and less onerous rules of origin requirements for exporting to the
UK in order to facilitate the expansion of trade with developing nations like Bangladesh.

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According to a report by the private research group Research and Policy Integration for
Development (RAPID), Bangladesh's exports of ready-made clothing to the UK might increase
by two and a half times to $11 billion by 2030 as a result of the relaxation of export restrictions,
which is scheduled to go into effect in the year 2023. The DCTS has loosened several
restrictions, and China's market share there is decreasing, thus the growth rate there might be
10% until 2026. However, Bangladesh's duty-free export capability under market preferences
to nations other than the member-states of the European Union would terminate after LDC
graduation in 2026, increasing the concentration in the UK. Because of this, the growth
estimate for exports to the UK is 15% starting in 2026.

4.2.3. WATNA analysis for Bangladesh and EU

As WATNA stands for “Worst alternative to a negotiated agreement”, in Bangladesh and the
EU’s RMG trade negotiation no agreement is the worst result for the both countries. If there is
no agreement between them then Bangladesh will face great losses as most of its RMG product
demand comes from the EU (Mirdha, 2023). It will be difficult for Bangladesh to find new
market in such a short time and a large comparable market is not easily available. For example,
the opening of a GSP investigate will offer a time-limited framework during which the
Government of Bangladesh will have two options: either finally adhere to its legally binding
responsibilities under the ILO fundamental conventions or forfeit significant EU trade
privileges in whole or in part (Miedema, 2017).

Another example is as the result of new GSP rule of EU, Bangladesh will face losses due to
tariff rates. After the official declaration as a "developing country," the "zero duty" access to
the EU will remain in effect for three years. The average duty rate for Bangladeshi exports
would be 8.7% if the EBA (Everything But Arms) privileges were to end after that.
Additionally, it is predicted that shipments would decline by 5.7% annually. Bangladesh must
be eligible for the GSP+ program in order to counteract these disadvantages and maintain its
export market competitiveness (Moazzem & Khandker, 2019). If the two country don’t go
negotiate over these issues it cost Bangladesh 5.7% annual RMG export decline. And if they
go for negotiation over tariff reduction then the result of no agreement will also be the same
for Bangladesh.

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On the other hand, it’ll not so beneficial for the EU countries if the negotiation doesn’t go right.
Because the EU countries can’t enjoy Bangladeshi products with the lowest cost. Yes, EU has
China, Turkey, India and so many country as their BATNA but they choose Bangladesh over
these countries for its cost, quality, production capacity, lead time, compliance with labour and
environmental standards, and trade agreements facilities. If there is no negotiation, then EU
will lose these facilities also.

4.1.4. Resistance point for Bangladesh and EU

The very minimal conditions that a negotiator is ready to accept during a negotiation are known
as a resistance point (RP) (Gordon, 2022). A party will start to resist suggested solutions when
they are outside of their normal range, which is known as the resistance point. The parties are
frequently trying to control the greatest or the least amount of money at this point in distributive
bargaining. Resistance point is mainly walk away point, after which point the party will not
agree to the negotiation or say no to the other party. For example, in the negotiation between
Bangladesh and EU, if EU require any condition that is beyond the capacity of the Bangladesh
garment industry then they will resist. And EU as a buyer of RMG products will try to set their
RP at a minimum possible rate, while Bangladesh as a seller of RMG products will try to set
their RP at a maximum rate. If any party’s RP is not met, then they will resist or choose not to
negotiate with the other.

4.1.5. Zone of Possible Agreement (ZOPA) for Bangladesh and EU

The zone of possible agreement, also known as the negotiation range, is thought of as a
potential area where two or more negotiating parties might establish common ground. Parties
will frequently make concessions and reach an agreement in this area. The parties to a
negotiation must strive toward a common objective and look for a solution that incorporates at
least some of each party's ideas in order to reach a settlement or an agreement (Halton, 2021).
In the negotiation between Bangladesh and EU the ZOPA will be the range consists of both
parties RP. Negotiation will be successful where both parties agree to the point or where both
parties interest will be met. The ZOPA may change if one of the party compromise to certain
level. In the negotiation between the two countries, Bangladesh mostly compromise to the
conditions of the EU. So, ZOPA sometimes change for both party’s interest.

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4.2. EU’s power in the negotiation
The European Union (EU) wields significant power in negotiations with Bangladesh regarding
the Ready-Made Garments (RMG) industry. The EU is one of the largest export markets for
Bangladeshi garments (Uddin M. , 2022), and its member states collectively have considerable
influence over trade policies. Here are some key points highlighting the EU's power in EU-
Bangladesh negotiations:

(a) Market Size: The EU is a major market for Bangladesh's RMG exports, accounting for a
significant portion of the country's total garment exports. In terms of value, Bangladesh
continued to be the second-largest apparel supplier to the trading bloc, following only China
(24.55%) with a share of 24.07% of the EU's total garment imports (Mirdha, 2023). In the
months of January and February 2023, the EU imported $183 million more worth of clothing
from Bangladesh than the previous year (Mirdha, 2023). This economic dependency gives the
EU leverage to shape trade negotiations and demand improvements in labour standards, worker
rights, and environmental practices.

(b) GSP+ Scheme: The EU's Generalized System of Preferences Plus (GSP+) scheme grants
preferential trade benefits to developing countries that abide by specific international
conventions on human rights, labour rights, sustainable development, and good governance.
Bangladesh has been a beneficiary of GSP+ status since 2001, allowing duty-free access to the
EU market for most of its garment products. However, the EU can use this scheme as a tool to
incentivize reforms and exert pressure on Bangladesh to improve working conditions and enact
labour reforms.

(c) Trade Agreements: The EU has the authority to negotiate trade agreements with countries
outside the bloc. By leveraging its economic strength, the EU can negotiate favourable terms
that align with its interests. In the case of Bangladesh, the EU can use its bargaining power to
push for regulatory changes, promote sustainability, and encourage social compliance in the
RMG sector.

(d) Conditionality and Monitoring: The EU has employed conditionality measures and
monitoring mechanisms to ensure compliance with labour standards and other requirements.
This includes conducting regular assessments of Bangladesh's progress in areas such as labour

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rights, workplace safety, and environmental sustainability. The threat of losing trade
preferences or facing trade sanctions provides the EU with significant influence during
negotiations.
(e) International Reputation: The EU has a reputation for championing human rights,
workers' rights, and sustainable development. By leveraging its influence and emphasizing the
importance of these values, the EU can pressure Bangladesh to address issues related to labour
rights, safety standards, and environmental sustainability in the RMG sector.

It's important to note that negotiations between the EU and Bangladesh are typically based on
mutual interests and involve complex considerations beyond the power dynamics. However,
the EU's economic influence and commitment to certain principles give it substantial leverage
in shaping the outcome of discussions related to the RMG industry.

4.3. Bangladesh’s power in the negotiation

Bangladesh also possesses certain strengths and forms of power in the negotiation between the
European Union (EU) and Bangladesh regarding the Ready-Made Garments (RMG) sector.
The RMG industry is a crucial part of Bangladesh's economy, accounting for a significant
portion of its exports and employing millions of people. Regarding negotiations between the
European Union (EU) and Bangladesh's RMG sector, it's important to note that the EU is one
of the largest markets for Bangladeshi garment exports. Trade agreements and negotiations
between the two entities can have a significant impact on the industry. In such negotiations,
Bangladesh's power lies primarily in its position as a major supplier of garments to the EU
market. Its large-scale production capabilities, competitive labour costs, and established
infrastructure make it an attractive sourcing destination for global clothing brands. This gives
Bangladesh some leverage to negotiate favourable trade terms and market access with the EU.
Here are some of the key strengths and forms of power that Bangladesh possesses:

(a) Cost-Competitive Production: Bangladesh has a significant advantage in terms of low

labour costs compared to many other garment-producing countries. The cheap labour supply is
responsible for the RMG sector's inherent competitive components (Yunus & Yamagata,
2012). This cost competitiveness makes Bangladeshi garments attractive to international
buyers and gives Bangladesh bargaining power in negotiations.

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(b) Large-Scale Manufacturing Capacity: Bangladesh has established itself as one of the
largest manufacturers of RMG globally. The country's extensive manufacturing capacity
enables it to fulfil substantial orders and meet the demands of international buyers. This
positions Bangladesh as an important player in the global RMG market, enhancing its
negotiating power.
(c) Trade Dependence: The EU is one of the largest export markets for Bangladeshi garments.
This trade dependence means that disruptions or unfavourable trade terms could have adverse
effects on both Bangladesh's economy and the EU's sourcing of garments. Bangladesh can
leverage this dependency to negotiate favourable trade conditions and market access.

(d) Compliance Improvements: Following several industrial accidents in the past, such as the
Rana Plaza collapse in 2013, Bangladesh has made efforts to improve safety standards and
working conditions in its RMG industry. These improvements demonstrate Bangladesh's
commitment to addressing concerns raised by the EU and international stakeholders. The
progress made in compliance can enhance Bangladesh's credibility during negotiations.

(e) Collective Bargaining Power: Bangladesh's RMG sector employs millions of workers,
making it a significant source of employment in the country. The collective bargaining power
of the industry's workforce can influence negotiations, especially regarding labour rights,
wages, and working conditions. International pressure to ensure fair treatment of workers
empowers Bangladesh in advocating for its workers' rights while negotiating with the EU.

These are some of the strengths and forms of power that Bangladesh possesses in negotiations
with the EU regarding the RMG sector. However, it's important to note that negotiations
involve a complex interplay of various factors and interests, and outcomes can be influenced
by multiple considerations from both sides.

4.4. Bangladesh’s weaknesses in the negotiation

In the coming years, Bangladesh will pass from the position of least-developed to middle-
income countries, and preferential access to markets in Europe and elsewhere is negotiable.
The RMG sector would be severely disrupted by additional tariffs, but levelling the playing
field with rival markets might also inspire investment in digitization, automation, and
sustainability as well as a much-needed productivity focus (Berg et al, 2021). In EU-

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Bangladesh negotiations regarding the Ready-Made Garments (RMG) industry, Bangladesh
faces certain weaknesses that can impact its bargaining power. Here are some key weaknesses:

(a) Labour Standards and Worker Rights: Bangladesh has faced significant criticism and
international scrutiny regarding labour standards and worker rights in the RMG sector.
Although the passing of the Bangladesh Labour Law was a significant step towards providing
justice for garment workers, working conditions in factories have not changed, and wages for
workers are still far below the poverty line. Nevertheless, the law's main provisions were not
enforced, which prevented it from having a significant impact on the lives of workers (Islam,
2018). Issues such as low wages, poor working conditions, lack of safety measures, and limited
freedom of association have been raised by labour rights organizations and international bodies.
These weaknesses weaken Bangladesh's position in negotiations as it gives the EU leverage to
demand improvements in these areas.

(b) Workplace Safety: The Rana Plaza tragedy in 2013, where a building housing several
garment factories collapsed, killing over 1,100 workers, highlighted the inadequate workplace
safety practices in Bangladesh's RMG industry. The Bangladeshi government has a big
obligation to guarantee workplace safety in all the factories that produce garments. Foreign
purchasers won't put orders here if we can't make it, which will be a huge damage to
Bangladesh's RMG industry (Berg et al, 2021). Despite efforts to improve safety standards
since then, concerns about fire safety, structural integrity, and overall safety measures persist.
Addressing these weaknesses is crucial for Bangladesh to strengthen its position in
negotiations.

(c) Environmental Sustainability: The environmental impact of Bangladesh's RMG industry,

including issues related to water pollution, energy consumption, and waste management, has
drawn attention globally. As sustainability becomes an increasingly important aspect of global
trade, Bangladesh's weak environmental practices can be a point of negotiation disadvantage,
as the EU may seek commitments towards more sustainable and responsible production.

(e) Regulatory Framework: Bangladesh's regulatory framework and enforcement

mechanisms have often been criticized for being inadequate or inconsistent. Weaknesses in
enforcing labour laws, ensuring compliance with international labour standards, and

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implementing safety regulations undermine the country's negotiating position and provide the
EU with opportunities to push for reforms.

(f) Economic Dependence: While Bangladesh heavily relies on exports, particularly RMG
products, the country's economic dependency on the EU market can also be seen as a weakness
in negotiations. Any disruption in trade relations or the loss of preferential market access would
have significant economic consequences for Bangladesh. This vulnerability can impact
Bangladesh's bargaining power and limit its ability to negotiate from a position of strength.

It's important to note that Bangladesh has made efforts to address these weaknesses and
improve the conditions in the RMG industry. The government and various stakeholders have
implemented reforms, increased inspections, and taken steps to enhance safety and labour
standards. However, these weaknesses continue to pose challenges in EU-Bangladesh
negotiations surrounding the RMG sector.

4.5. Why EU choose Bangladesh for RMG import over china or turkey
The European Union (EU) has chosen Bangladesh for ready-made garment (RMG) imports
due to several reasons, despite having other sourcing options like China and Turkey. Here are
some factors that have contributed to this choice:

(a) Cost Competitiveness: Bangladesh offers lower production costs compared to China and
Turkey. The labour costs in Bangladesh are relatively low, which attracts EU buyers looking
for cost-effective sourcing solutions.

(b) Trade Preferences: The EU has granted trade preferences to developing countries like
Bangladesh through initiatives such as the Generalized System of Preferences (GSP). These
preferential trade agreements provide duty-free or reduced tariff access to Bangladeshi garment
exports. These trade preferences make Bangladeshi garments more affordable for EU importers
compared to those from China or Turkey.

(c) Specialization in RMG: Bangladesh has specialized in the RMG sector and has developed
a strong infrastructure and expertise in garment manufacturing. The country has a large pool
of skilled and semi-skilled workers who are experienced in producing garments in bulk

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quantities. This specialization makes Bangladesh an attractive sourcing destination for EU
retailers.

(d) Compliance and Sustainability Efforts: Although Bangladesh faced significant

challenges in terms of labour rights and safety standards in the past, it has made notable
progress in improving compliance and sustainability in the RMG industry. After incidents like
the Rana Plaza tragedy, Bangladesh implemented reforms to enhance worker safety and
improve working conditions. These efforts have been acknowledged by the EU and have
contributed to continued sourcing from Bangladesh.

(e) Product Diversification: Bangladesh offers a wide variety of garment products, ranging
from basic apparel to more sophisticated items. This product diversification caters to the
diverse demands of EU consumers and allows retailers to source a range of garments from a
single country.

While China and Turkey also remain major players in the global RMG market, the EU's choice
to import from Bangladesh is influenced by factors such as cost competitiveness, preferential
trade agreements, specialization in the RMG sector, compliance and sustainability efforts, and
product diversification. It's worth noting that sourcing decisions can vary based on factors like
cost fluctuations, trade policies, supply chain dynamics, and market demands, which may
evolve over time.

4.6. How to improve the negotiation situation between the two countries?
To improve the trade negotiation between the European Union (EU) and Bangladesh regarding
ready-made garment (RMG) trade, both parties can consider the following strategies:

(a) Enhanced Dialogue and Engagement: Establishing a structured platform for regular
dialogue and engagement is crucial. This could involve high-level government representatives,
industry associations, labour unions, and other stakeholders from both the EU and Bangladesh.
Open and transparent communication channels would help to address concerns, exchange
information, and build trust.

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(b) Addressing Non-Tariff Barriers (NTBs): Both sides should work towards reducing and
eliminating non-tariff barriers that hinder RMG trade. This includes streamlining customs
procedures, simplifying documentation requirements, and aligning technical standards and
regulations. Harmonizing trade facilitation measures would promote smoother trade flows and
reduce transaction costs.

(c) Capacity Building and Technical Assistance: The EU can provide targeted capacity
building programs and technical assistance to Bangladesh. This can include training initiatives
in areas such as product quality, compliance with social and environmental standards,
productivity improvement, and supply chain management. Enhancing the capabilities of
Bangladeshi manufacturers and workers would contribute to overall trade competitiveness.

(d) Sustainability and Social Responsibility: Collaboration on sustainability initiatives is

crucial for both parties. The EU can support Bangladesh's efforts to improve labour rights,
workplace safety, and environmental sustainability in the RMG sector through technical
expertise, best practice sharing, and financial aid if necessary. Implementing robust monitoring
systems and certification schemes would enhance transparency and accountability.

(e) Trade Finance and Investment Promotion: Facilitating access to trade finance and
promoting investment in the RMG sector is important. The EU can support initiatives to
increase access to affordable financing for Bangladeshi exporters and encourage EU companies
to invest in Bangladesh. This would spur technology transfer, infrastructure development, and
job creation.

(f) Market Diversification and Value Addition: Promoting market diversification and
encouraging value addition in the RMG sector would be beneficial. The EU can assist
Bangladesh in exploring new markets and differentiating its products through branding, design
innovation, and product development. Joint initiatives that focus on higher-end products and
niche markets can lead to increased profitability for both sides.

(g) Monitoring and Evaluation Mechanisms: Establishing effective monitoring and

evaluation mechanisms is essential to ensure the implementation and enforcement of agreed-
upon commitments. Regular assessments of progress, including compliance with labour and
social standards, would create a sense of accountability and strengthen the trade relationship.
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By adopting these strategies, the EU and Bangladesh can work towards improving their RMG
trade negotiation, leading to a more balanced and mutually beneficial partnership.

4.7. From distributive to integrative negotiation

To transform the ready-made garment (RMG) trade negotiation between the European Union
(EU) and Bangladesh from a distributive to an integrative negotiation, the following
approaches can be considered:

(a) Focus on Shared Interests: Both parties should identify and focus on shared interests
rather than viewing the negotiation as a zero-sum game. By emphasizing common goals such
as sustainable growth, improved working conditions, and mutual economic benefits, they can
shift the negotiation towards a collaborative and problem-solving approach.

(b) Expand the Agenda: Instead of solely focusing on issues related to tariffs and market
access, the negotiation agenda can be expanded to include broader topics such as capacity
building, technology transfer, sustainability, and value addition. This expansion allows for a
more comprehensive and holistic discussion that promotes long-term cooperation and mutual
gains.

(c) Information Sharing: Open and transparent sharing of information can help build trust
and facilitate a better understanding of each party's needs, constraints, and priorities. Both the
EU and Bangladesh should provide relevant data on market dynamics, production capabilities,
cost structures, and compliance measures. This will enable informed decision-making and
foster a cooperative atmosphere.

(d) Creative Problem-Solving: Encouraging creative problem-solving techniques, such as

brainstorming or joint problem analysis, can generate innovative solutions that benefit both
parties. By exploring alternative options and considering different perspectives, the negotiation
can move beyond rigid positions and find mutually satisfactory outcomes. For example, if
Bangladesh have to compliance to the conditions of EU and as there no other option for
Bangladesh to choose they can find alternative options for EU to choose. For instance,
Bangladesh can offer low price for product but can ask for an 10 or 20 years agreement of

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RMG orders from EU. Or they can stick to the current price but offer instalment payment for
their client.

(e) Collaborative Decision-Making: Engaging in collaborative decision-making processes

can enhance the sense of ownership and commitment from both sides. Joint committees or
working groups comprising representatives from the EU, Bangladesh government, industry
associations, and labour unions can be formed to facilitate ongoing dialogue, consensus-
building, and implementation of agreements. The two country can work together to find new
solution to their problem. For example, the case of GSP regulation Bangladesh can agree to
maintain strict compliance and EU can also offer some flexibility for the dedication of
Bangladesh.

(f) Long-Term Relationship Building: Viewing the negotiation as part of a broader long-term
relationship is crucial. It is important for the two country to build strong relationship which can
help further both of them. Both parties should invest in building strong ties, fostering
partnerships, and facilitating regular communication beyond the negotiation process. This
relationship-building approach creates a foundation for future collaboration and ensures the
sustainability of the negotiated outcomes.

(g) Mediation and Facilitation: If negotiation challenges arise, the involvement of neutral
third-party mediators or facilitators can help overcome impasses and find mutually acceptable
solutions. These mediators can assist in reframing issues, managing conflicts, and guiding the
negotiation towards integrative outcomes.

By adopting these approaches, the RMG trade negotiation between the EU and Bangladesh can
transition from a distributive mind-set to an integrative one, fostering a cooperative and
mutually beneficial relationship for sustainable growth and shared prosperity.

4.8. Find the win-win result

To achieve a win-win result in the trade negotiations between the European Union (EU) and
Bangladesh concerning ready-made garment (RMG) trade, both parties can focus on the
following aspects:

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(a) Market Access: The EU can consider maintaining or expanding preferential trade
agreements with Bangladesh, such as the Generalized System of Preferences (GSP). This
would allow continued duty-free or reduced tariff access for Bangladeshi RMG exports to the
EU market. At the same time, Bangladesh can strive to improve its competitiveness by
enhancing productivity, efficiency, and product quality.

(b) Compliance and Sustainability: Both the EU and Bangladesh should collaborate to ensure
compliance with international labour standards, safety regulations, and environmental
sustainability in the RMG industry. The EU can support Bangladesh's efforts through technical
assistance, capacity building, and monitoring mechanisms. This collaboration would enhance
worker rights, occupational safety, and sustainable practices, resulting in a positive image for
Bangladeshi RMG exports.

(c) Social Responsibility: Brands, retailers, and manufacturers in the EU can actively engage
with their Bangladeshi counterparts to promote responsible business practices, including fair
wages, safe working conditions, and workers' welfare. This partnership would contribute to
enhancing the social responsibility aspect of the RMG supply chain.

(d) Skill Development and Technology Transfer: The EU can provide support to Bangladesh
in terms of skill development programs, training initiatives, and technology transfer. This
would empower Bangladeshi workers and manufacturers to upgrade their skills, adopt
advanced production techniques, and improve overall productivity and efficiency.

(e) Collaboration on Value Addition: The EU and Bangladesh can explore opportunities for
collaboration beyond manufacturing, such as design, research and development, innovation,
and branding. By developing partnerships that focus on value addition and higher-end products,
both parties can benefit from increased trade diversification and higher profit margins.

(f) Dialogue and Consultation: Regular dialogue and consultation between the EU and
Bangladesh, involving government representatives, industry stakeholders, and worker
organizations, can help address concerns, identify common goals, and build trust. This open
and transparent communication would facilitate the negotiation process and lead to mutually
beneficial outcomes.

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By considering these factors and adopting a cooperative approach, the EU and Bangladesh can
work together towards a win-win result in their RMG trade negotiations. Such an outcome
would ensure sustainable growth, improved working conditions, increased market access, and
strengthened bilateral trade relations.

5.0. Conclusion
Finally, it should be noted that the trade talks between Bangladesh and the European Union
(EU) on the ready-made garments (RMG) sector have been a key step toward promoting
economic collaboration and assuring sustainable growth. Both sides have worked to improve
trade relations, support ethical employment practices, and enhance working conditions in the
RMG industry through these negotiations. Bangladesh's efforts to enact reforms and solve
issues with worker safety, labour rights, and environmental sustainability have been recognized
by the EU. There are possibilities for Bangladesh in RMG sector and EU is the major market
for it. Bangladesh has to lower the dependency on EU for its RMG demand. It can explore its
opportunity by diversify its market. Bangladesh has the facility in EU market because of its
GSP facility. As a result, Bangladeshi RMG products now have greater access to the EU
market, which is good for the nation's economy and opens up job prospects. The negotiations
have also cleared the path for Bangladesh and to continue working together and
communicating, reaffirming their dedication to moral and ethical trade practices in the
international marketplace.

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