World Bank Recommends Phased Tariff Reform to Boost Bangladesh Trade Competitiveness

🌏 Dhaka, Bangladesh — The World Bank has recommended phased tariff cuts, removal of para-tariffs and deeper trade agreements as Bangladesh prepares for LDC graduation on 24 November 2026, with the government requesting a deferral of at least three years.

📊 The recommendations were made in a new World Bank study titled “Bangladesh Trade Policy at a Crossroads: Evidence for the National Tariff Policy, LDC Graduation, and the Next Generation of Trade Agreements”, presented by Dr Nora Dihel, Senior Economist for Macroeconomics, Trade and Investment at the World Bank, at a programme here today.

🏛 The Policy Research Institute of Bangladesh (PRI), in collaboration with the World Bank Group, organized the programme at its Banani office in the city.

📊 Bangladesh Tariff Structure: MFN 7% vs Nominal 15.4%

📊 According to the study, Bangladesh’s trade-weighted average Most Favoured Nation (MFN) tariff stands at 7.0 percent across 5,666 tariff lines based on FY2026 data. However, after para-tariffs (regulatory and supplementary duties) are taken into account, average nominal protection rises to 15.4 percent.

📊 The gap is particularly significant in sectors such as:

• 👞 Footwear: nominal protection 70.4% vs MFN tariff 25%
• 🧴 Hides and skins
• ᾪ Stone and glass
• 🚗 Transportation equipment

💰 Fiscal Cost of Tariff Reform

📊 Using its Tariff Reform Impact Simulation Tool (TRIST), the World Bank estimated the fiscal implications of various reform scenarios:

• 💰 10% reduction in customs duties alone: reduces import tax revenue by ~$189 million
• 💰 10% customs duty cut + full removal of para-tariffs: fiscal cost rises to ~$1.4 billion
• 💰 Complete elimination of customs duties + para-tariffs: cost ~$3.7 billion (40.8% of import tax revenue or 0.83% of GDP)

⚠ The World Bank therefore stressed the need for a carefully sequenced reform programme rather than an abrupt reduction in border protection.

📈 Economic Gains from Trade Reforms

📊 The study estimated the potential economic gains from trade reforms:

• 📈 Unilateral trade reforms (deeper cuts in input tariffs, removal of para-tariffs on intermediate goods): increase real GDP by up to 0.52%
• 📈 Deeper multi-partner FTA strategy (benchmarked against Vietnam’s trade agreements): raise real GDP by 0.73% or around $3.2 billion
• 📊 About two-thirds of the gains from FTA strategy come from agreements with RCEP and ASEAN members

📋 World Bank Recommendations

📊 The World Bank recommended:

• 📊 Gradually reduce para-tariffs (regulatory and supplementary duties)
• 📊 Bring tariff structure closer to regional competitors (India, China, Vietnam)
• 💰 Strengthen domestic revenue mobilisation to manage fiscal implications
• 🚫 Remove non-tariff barriers
• 🤝 Liberalise services trade
• 👥 Adjustment support for workers and sectors affected by trade liberalisation
• 📈 Pursue deeper trade agreements to prepare for LDC graduation
• 🌏 Combine domestic tariff reforms with active strategy to secure preferential market access
• 🌏 Expand participation in regional and global trade arrangements after LDC graduation

🏛 PRI Programme Participants

📊 The study was presented at a high-level discussion organised by PRI, bringing together policymakers, economists, researchers and business leaders to discuss Bangladesh’s National Tariff Policy, LDC graduation and the next generation of trade agreements.

👥 Key participants:

• 🏛 Dr. Zaidi Sattar — PRI Chairman (chaired the programme)
• 🏛 Md. Fazlul Hoque — Administrator, Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) (chief guest)
• 🏛 Dr. Ahsan H. Mansur — PRI Distinguished Fellow (delivered closing remarks)
• 👥 Distinguished economists, researchers and business leaders

🌏 Strategic Context: LDC Graduation November 2026

📊 For Bangladesh’s trade strategy, the LDC graduation deadline creates urgency:

• 📅 LDC graduation date: 24 November 2026
• 📅 Government request: deferral of at least 3 years
• 📊 EU EBA preference loss: significant impact on RMG exports
• 📊 US GSP eligibility: potential market access changes
• 📊 Tariff exposure increase: without trade agreements, post-LDC tariffs apply

📊 Comparison with Regional Competitors

📊 Bangladesh’s tariff structure is significantly higher than regional competitors:

• 🇧🇩 Bangladesh MFN tariff: 7.0% (15.4% with para-tariffs)
• 🇮🇳 India: lower MFN and minimal para-tariffs
• 🇨🇳 China: lower overall tariff structure
• 🇻🇳 Vietnam: low MFN, multiple FTAs reducing effective rates

📊 Vietnam’s success in securing FTAs (CPTPP, EVFTA, UKVFTA, RCEP) has enabled it to capture significant market share from higher-tariff competitors — a model Bangladesh should emulate.

💰 Implications for Bangladesh Export Community

📊 For Bangladesh’s export community, particularly RMG manufacturers, the World Bank recommendations have significant implications:

• 📊 Input cost reduction — lower tariffs on intermediate goods reduce production costs
• 📊 Competitiveness improvement — aligns tariff structure with Vietnam competitors
• 📊 FTA market access — RCEP/ASEAN agreements could open new markets
• 📊 LDC graduation preparation — mitigates preference loss through bilateral FTAs
• 📊 Services trade liberalisation — opportunities for IT, professional services exports
• 📊 Adjustment support — protection for sectors facing import competition

📋 Path Forward: Sequenced Reform

✅ For Bangladesh’s policymakers, the World Bank study offers a roadmap for sequenced tariff reform that balances economic gains with fiscal sustainability:

• 📊 Phase 1 (2026-2027): Reduce para-tariffs on intermediate goods, simplify tariff structure
• 📊 Phase 2 (2027-2028): Deeper cuts in input tariffs, removal of NTBs
• 📊 Phase 3 (2028-2030): Pursue FTAs with RCEP, ASEAN, EU, UK; align with regional competitors
• 📊 Revenue mobilisation: Strengthen NBR capacity, broaden tax base, digital invoicing
• 📊 Adjustment support: Worker retraining, sector-specific transition assistance

🌏 For Bangladesh’s broader economic strategy, the World Bank recommendations underscore that tariff reform is not just about lowering duties — it is about positioning Bangladesh for the next phase of export-led growth. With LDC graduation approaching and global trade dynamics shifting rapidly, Bangladesh has a narrow window to implement the reforms needed to maintain export competitiveness and capture new market opportunities through deeper trade agreements.

📊 The study’s finding that two-thirds of FTA gains come from RCEP and ASEAN agreements highlights the strategic importance of Bangladesh pursuing membership in regional trade blocs — particularly RCEP, which includes China, Japan, South Korea, Australia, New Zealand and the 10 ASEAN countries. If Bangladesh can secure RCEP membership in the coming years, it could unlock significant export market access while also gaining competitive input sourcing for its manufacturing sector — mirroring Vietnam’s successful trade agreement strategy.