According to a recent report by the US International Trade Commission (USITC), American buyers view Bangladesh as a promising alternative for sourcing apparel, on par with countries like China and Vietnam. Bangladesh’s apparel sector has achieved significant export growth in the U.S. market, despite lacking market preferences or duty breaks like those offered to destinations such as the European Union.

In 2023, the United States was Bangladesh’s largest single-country apparel export market, with exports totaling $7.1 billion and representing 17.4% of Bangladesh’s exports. Meanwhile, exports to the EU totaled $18.8 billion, underscoring the importance of these markets. Over the past decade (2013-2023), Bangladesh’s apparel exports to key destinations have grown by 51.5% in the United Kingdom, 31.9% in Canada, and 123% in Japan.

U.S. apparel imports from Bangladesh increased by 92% from $4.8 billion in 2013 to $9.2 billion in 2022, before slightly declining in 2023. Despite the dip, Bangladesh remains the third largest apparel supplier to the U.S. market. Bangladesh’s apparel exports to the U.S. are subject to a 16.9% applied duty, the highest among the top 10 destination markets, as it does not enjoy duty-free access like it does in other markets, including the EU, Japan, and Canada. In the 1990s, nearly 50% of Bangladesh’s apparel exports went to the U.S., but by 2023, this share had fallen to 17.4% as the industry diversified to markets with duty-free access.

The USITC report details significant growth in Bangladesh’s apparel industry over the last decade. From 2013 to 2023, Bangladesh’s apparel exports grew by over 60%, from $24.1 billion to $39.8 billion, consistently accounting for 82-86% of its total exports. In 2023, Bangladesh held a 9% share of the U.S. apparel import market, up from 6% in 2013, with knit apparel seeing higher growth than woven items and man-made fiber (MMF) garments rising from 17% to 25.3% of U.S. imports from Bangladesh.

Bangladesh’s competitiveness in the apparel industry stems from various factors, including low labor and input costs, domestic sourcing of materials, economies of scale, and duty-free access to major non-U.S. markets. The country’s vertically integrated industry and large factory capacity enable it to fill large orders efficiently, a critical factor for buyers seeking bulk items. Additionally, government policies, such as bonded warehouses, separate credit lines, and industry subsidies, contribute to its competitive edge, though recent tax incentive reductions may affect future costs.

The report also highlights Bangladesh’s transition from basic apparel categories to higher value-added and higher-priced items. This shift aims to diversify its offerings and reduce vulnerability to global economic shocks. Despite a recent wage increase of 56.3% for the lowest-grade apparel workers in January 2024, Bangladesh maintains one of the lowest minimum wage rates for apparel workers globally, partially attributed to low unionization rates. Wages in the

apparel sector remains above those in other manufacturing sectors, but the five-year review cycle may limit wage adjustments relative to inflation.

The industry has made strides in improving workplace safety but faces ongoing social responsibility challenges, particularly labor issues. Some U.S. buyers have noted that reports on labor standards violations can deter sourcing from Bangladesh. Nonetheless, Bangladesh remains one of the few countries capable of competing with China on cost for large orders, and many brands consider it the only alternative for large-scale sweater production.

However, an article published by Business Standard on 21 October criticized Bangladesh’s garment sector, claiming it faces “growing concerns.” The piece, which emphasizes India’s appeal as an apparel-sourcing destination, inaccurately cited the USITC report to imply instability in Bangladesh’s apparel sector. However, the report contains no reference to political stability concerns in Bangladesh’s apparel industry.

Source: The Business Standard