Introduction
The global textile and apparel industry is undergoing a subtle yet important transformation as trade policies, supply-chain realignments, and geopolitical considerations reshape traditional export patterns. A recent development involving preferential access for Bangladeshi garments in the United States has triggered fresh debates about competitiveness, sourcing strategies, and India’s position in the global textile value chain.
Textiles are not merely a commercial commodity for India; they represent livelihoods for millions, anchor rural–urban employment, and contribute significantly to foreign exchange earnings. Therefore, even small changes in international tariff structures can create ripple effects across spinning mills, garment factories, cotton farmers, and export houses.
This article examines the evolving textile trade relationship among India, the United States, and Bangladesh, focusing on economic consequences, supply-chain adjustments, and strategic options for India.
1. Why Textiles Matter in Global Trade
Textiles and apparel form one of the most globalised manufacturing sectors. Production is typically fragmented across countries:
- Raw cotton may be grown in one nation
- Yarn spun in another
- Fabric processed elsewhere
- Final garments stitched in a low-cost manufacturing hub
This fragmentation makes the sector highly sensitive to:
- Tariff changes
- Rules of origin
- Input sourcing conditions
- Logistics costs
For developing economies, garments often serve as the first step into export-led industrialisation due to their labour-intensive nature and relatively low technology barriers.
South Asia has emerged as one of the world’s most important textile clusters, with India and Bangladesh playing complementary—but increasingly competitive—roles.
2. Bangladesh’s Rise as a Garment Export Powerhouse
Over the last two decades, Bangladesh has transformed itself into a global hub for ready-made garments (RMG). Its success rests on three pillars:
a) Cost-competitive labour
Bangladesh offers one of the lowest manufacturing wage structures among major apparel exporters, allowing it to dominate price-sensitive segments such as basic T-shirts, denim, and casual wear.
b) Export-oriented industrial ecosystem
Large garment clusters near ports, streamlined customs procedures, and strong buyer relationships with Western brands have enabled rapid scaling of exports.
c) Integration into global value chains
Rather than producing everything domestically, Bangladesh imports large quantities of cotton, yarn, and fabric, assembling them into finished garments for export.
The United States has become one of Bangladesh’s most important destinations, making American trade policy a critical factor for Dhaka’s garment industry.
3. India’s Textile Sector: Strengths and Structural Constraints
India possesses one of the most complete textile value chains in the world—from cotton cultivation to high-end apparel manufacturing. Yet its export performance has not matched its potential.
Key strengths:
- One of the world’s largest cotton producers
- Strong spinning and weaving capacity
- Large domestic market providing scale
- Growing technical textile capabilities
Persistent challenges:
- Higher production costs compared to Bangladesh and Vietnam
- Fragmented garment manufacturing (dominated by MSMEs)
- Limited penetration in man-made fibre apparel
- Infrastructure and logistics bottlenecks
While India exports garments worth billions annually, its global market share remains modest relative to its resource base.
4. The New Trade Arrangement and Its Immediate Significance
The United States has recently offered tariff concessions on select Bangladeshi apparel exports, subject to specific sourcing conditions—particularly the use of American textile inputs.
Though technical in nature, this arrangement carries broader implications:
- It provides Bangladesh with enhanced price competitiveness in the US market.
- It encourages the use of US cotton and fibres within Bangladeshi supply chains.
- It introduces a differentiated tariff environment between India and Bangladesh for similar products.
Indian apparel exports, meanwhile, continue to face standard reciprocal tariffs.
Even small percentage differences in tariffs can strongly influence buyer decisions in the apparel industry, where margins are thin and competition is intense.
5. Supply-Chain Reorientation: The Hidden Impact
The most significant consequence may not be finished garment exports—but raw material flows.
Bangladesh currently sources a large portion of its cotton yarn and fabrics from India due to:
- Geographic proximity
- Competitive pricing
- Established business relationships
However, tariff incentives tied to US inputs could motivate Bangladeshi manufacturers to gradually replace Indian cotton with American cotton to qualify for preferential access.
If this happens at scale:
- Indian cotton growers could lose a major export destination
- Spinning mills may face reduced overseas demand
- Ancillary industries such as logistics and processing would feel secondary effects
Thus, what appears to be a garment-level trade policy may ultimately reshape upstream agricultural and industrial networks.
6. Rules of Origin: The New Trade Gatekeepers
Modern trade agreements increasingly rely on “rules of origin” rather than simple tariff cuts.
These rules specify:
- How much local or partner-country content must be present
- Which production stages must occur within eligible territories
In this case, garments must incorporate US-origin materials to access preferential tariffs.
Such mechanisms effectively redirect supply chains, acting as industrial policy tools in disguise.
For India, this highlights a critical reality: market access today depends not only on export efficiency but also on integration into preferred geopolitical supply networks.
7. Potential Economic Effects on India
a) Export competitiveness
Indian garments risk becoming relatively more expensive in the US market, particularly in mass-market categories.
b) Cotton and yarn exports
Reduced Bangladeshi sourcing from India would directly impact India’s fibre exports.
c) Employment implications
Textiles are India’s second-largest employer after agriculture. Any slowdown in exports could affect millions of semi-skilled workers, especially women employed in garment factories.
d) Regional economic stress
States such as Gujarat, Maharashtra, Tamil Nadu, and Punjab—deeply linked to textile production—could feel localised economic pressure.
8. Strategic Dimensions Beyond Trade
This development also reflects broader geopolitical currents.
The United States is actively seeking to:
- Diversify supply chains away from China
- Strengthen economic ties with select partners
- Secure raw material dependencies
Bangladesh benefits from its role as a low-cost manufacturing base, while India is increasingly viewed through a strategic lens rather than purely commercial terms.
Trade preferences, therefore, are becoming intertwined with diplomacy and regional influence.
9. What Can India Do? Policy and Industry Responses
India’s response must be multidimensional.
1. Rationalise input tariffs
Reducing duties on imported cotton and fibres could help Indian exporters adapt to changing sourcing requirements.
2. Accelerate MMF expansion
Globally, over 65% of apparel is now made from man-made fibres. India must scale polyester and technical textile production to remain competitive.
3. Strengthen garment manufacturing
Larger factories, automation, and compliance upgrades are essential to match Bangladesh’s scale efficiencies.
4. Diversify export markets
Reducing dependence on the US by expanding presence in Europe, West Asia, and Africa can provide resilience.
5. Pursue deeper trade agreements
India needs comprehensive FTAs that deliver predictable market access rather than piecemeal concessions.
10. Long-Term Perspective: From Volume to Value
Instead of competing solely on low cost, India can reposition itself toward:
- Sustainable textiles
- High-value fashion segments
- Technical and medical textiles
- Design-led exports
Such a shift would reduce vulnerability to tariff fluctuations and labour-cost competition.
Conclusion
The emerging India–US–Bangladesh textile equation illustrates how modern trade is shaped less by factories alone and more by policies, partnerships, and production rules.
Bangladesh’s preferential access to the US market introduces new pressures on Indian exporters—not just in garments but across the entire cotton-to-clothing value chain.
For India, this moment serves as a strategic reminder: sustaining textile leadership requires continuous adaptation in trade diplomacy, industrial policy, and manufacturing capability.
The future belongs to countries that can combine scale with flexibility—and policy foresight with production strength.
