EU delays trade deal with Bangladesh amid criticism of protest response

The European Union has delayed talks with Bangladesh on a new cooperation deal following the 27-nation bloc's criticism of Dhaka's handling of deadly protests that resulted in at least 150 fatalities this month.

Experts warn that this development could potentially hamper Bangladesh's exports and foreign investments.

The announcement is a blow to the Awami League government, which is now facing economic and political challenges not encountered in its previous three terms.

"In light of the prevailing situation, the first round of negotiations on the Partnership and Cooperation Agreement envisaged for September has been postponed with no later date fixed as yet," the EU's foreign affairs spokesperson Nabila Massrali said in an email to Reuters.

The cooperation agreement aims to boost trade, economic, and development relations between Bangladesh and the 27-nation bloc, which is the main trading partner for the South Asian country, accounting for 20.7% of Bangladesh's trade in 2023, reports Reuters.

On 30 July, EU High Representative Josep Borrell also remarked on the recent developments in Bangladesh.

He said these acts must be thoroughly investigated and those responsible brought to justice. There must be full accountability for the numerous instances of excessive and lethal force used by the law enforcement authorities against protesters and others, including journalists and young children. The thousands arrested must receive due process.

"We will closely follow the actions of the authorities in the context of this crisis and, with the fundamentals of EU-Bangladesh relations in mind, expect all human rights to be fully respected," Borrell said.

Meanwhile, experts and exporters warn that the delay in negotiations could create uncertainty among businesses and investors in Bangladesh and impact export revenues as the EU accounted for half of Bangladesh's exports in FY24.

Ahsan H Mansur, executive director at the Policy Research Institute of Bangladesh, said the government's ability to peacefully resolve student issues is crucial for maintaining trade and political relations.

He highlighted that the current situation presents a significant challenge for the government, adding, "How the government handles this issue will matter for future negotiations."

The economist warned that not only European investments but all foreign investments could be adversely affected as the overall environment continues to deteriorate.

He noted that the country's political and trade relations are becoming increasingly complex and will not improve without a satisfactory resolution.

M Humayun Kabir, former Bangladesh ambassador to the US and president of the Bangladesh Enterprise Institute, told TBS, "This adds to the recent reactions from the EU, UN, and US over the past two to three days. My perception is that the EU's statement is more about sending a message, given that they are our major economic partner, than being substantive."

He said although the EU has postponed the talks for now, they may not last long, and they might resume the talks. "But they want to send a message. The question is whether we understand it. The EU's decision should be viewed in the context of global discussions on human rights violations, excessive use of force, or mass arrests," he noted.

What is concerning is that in the next two years, Bangladesh will be moving towards GSP Plus, he said. "To achieve that, we need to sign and comply with human rights documents. So, it is crucial for us to normalise our internal situation and re-engage with them (the EU) as soon as possible," said the former top diplomat.

M Masrur Reaz, chairman of Policy Exchange of Bangladesh, a private think-tank, said, "It will impact issues in the medium- and long-term horizon, particularly the GSP+ discussion and negotiation.

"As the EU is a powerful partner of the Western bloc, including the US, UK, Canada, Australia, and Japan, the EU's position on a particular country regarding human rights and the business environment may influence others."

Three exporters said buyers in the EU, which is the major market for Bangladesh's exports, will be extra cautious when sourcing from Bangladesh.

They said the decision to postpone the first round of negotiations on the Partnership and Cooperation Agreement may pressure European companies to relocate their businesses to stabilise their supply chains.

"Buyers in the EU are already concerned about the unrest in Bangladesh and any possible disruption in the shipment and supply chain. The latest development comes as a new challenge for us," said a top exporter wishing not to be named.

A leading apparel exporter, who requested anonymity, stated that they have not yet seen any impact on their business.

However, he expressed concern that if the European Union takes a stand against the country, it could negatively affect their operations.

Foreign ministry spokesperson Seheli Sabrin told TBS, "We are waiting for the draft text of the Partnership and Cooperation Agreement from the European Union. Upon receipt, we will take the next course of action."

Meanwhile, a top official of the Economic Relations Division told TBS that the negotiation dates have been shifted to November in consultation with both sides.

"The meeting date has been deferred to November because of the UN General Assembly meeting in September," claimed the official, but TBS could not immediately verify his claim.

On 25 October 2023, at the Global Gateway Forum, European Commission President Ursula von der Leyen, together with PM Hasina, launched the negotiations on a new Partnership and Cooperation Agreement to expand and develop the relationship between the EU and Bangladesh.

On this occasion, the EU, the European Investment Bank, and Bangladesh signed agreements worth €400 million for renewable energy projects to contribute to a sustainable green transition in Bangladesh's power sector and to the achievement of the country's climate mitigation targets.

Five additional cooperation actions, worth €70 million, supporting education, decent work, green construction, e-governance, and the prevention of gender-based violence were also launched.