EU GSP rules and Bangladesh’s RMG

After a three-year transition following LDC graduation, Bangladesh will lose the duty-free, quota-free access to the EU it currently enjoys under Everything But Arms (EBA) around the end of 2029, unless the transition is extended. As the EU absorbs more than half of Bangladesh apparel exports, whatever replaces EBA will shape the future of the readymade garment sector. The available options fall under the EU Generalised Scheme of Preferences (GSP), whose rules are widely misunderstood and have recently been substantially revised.

The new GSP Regulation (EU) 2026/1395, replacing the 2012 framework, was adopted by the European Parliament on April 28, 2026, and published in the Official Journal on June 22. It will apply from January 1, 2027, for 10 years.

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The GSP retains its three-tier structure. EBA, reserved for LDCs, will no longer apply to Bangladesh once the transition ends. Two technical rules will then determine whether Bangladesh benefits under the remaining tiers.

The first is double transformation. Apparel under HS Chapters 61 and 62 qualifies for preferences only when yarn is transformed into fabric and fabric into garments. The more flexible single-transformation rule under EBA will no longer apply after LDC graduation.

Bangladesh imports around 60 percent of its woven fabric, meaning compliance will require substantial investment in man-made fibre production and stronger backward linkages.

The second is the automatic safeguard mechanism, which applies only to GSP+ and Standard GSP. If a country’s GSP-covered exports in a product group exceed 37 percent of total EU GSP imports in that section, the EU suspends preferences and applies the normal most-favoured nation (MFN) tariff. By contrast, the 6 percent threshold is not a trigger but an exemption floor. Countries whose share of total EU imports of a product remains below 6 percent cannot face safeguard action.

Standard GSP is automatically available to low and lower-middle-income countries. It covers two-thirds of EU tariff lines but offers only reduced tariffs on sensitive goods. For apparel, a 12 percent MFN tariff falls to 9.6 percent, not zero.

Graduation removes a product section from preferences once a country’s share of GSP-covered EU imports exceeds the threshold. For apparel, Section S-11b covering HS Chapters 61 and 62, that threshold falls from 47.2 percent to 37 percent under the new regulation. With Bangladesh’s share estimated at around 50 percent, apparel would graduate from Standard GSP and revert to the full MFN tariff.

GSP+ reduces those tariff lines to zero, including apparel. A country must qualify as “vulnerable” and ratify the required international conventions. The new regulation removes the import-share vulnerability test but retains the concentration test: a country’s seven largest GSP product groups must account for at least 75 percent of its total GSP-covered exports to the EU. Bangladesh comfortably meets this requirement. The number of required conventions rises from 27 to 32, with the Paris Agreement among the additions. Applicants must ratify and actively implement all of them. Bangladesh cleared a significant hurdle in November 2025 by becoming the first Asian country to ratify the full set of fundamental ILO conventions.

However, the 37 percent safeguard threshold effectively rules out GSP+ for Bangladesh apparel exports, pushing them back to the full MFN tariff, while the double-transformation requirement adds further pressure. Securing GSP+ prequalification on schedule remains essential, as withdrawal on rights grounds remains a risk given continued scrutiny of Bangladesh labour standards. Missing the window would also close the door on GSP+ before Bangladesh could benefit. The strategy should therefore follow two tracks: securing more flexible rules of origin to bridge the backward-linkage gap, and pursuing a bilateral free trade agreement that provides permanent, unconditional market access beyond the preference system.

The writer is a former director of Bangladesh Garment Manufacturers and Exporters Association (BGMEA). He can be reached at mohiuddinrubel@gmail.com