The new trade agreement between Washington and Dhaka is being pitched as a victory for American farmers. Under the Agreement Between the United States of America and the People’s Republic of Bangladesh on Reciprocal Trade, Bangladesh has committed to providing preferential access for U.S. agricultural goods, dismantling non-tariff barriers, and recognising American sanitary and phytosanitary certifications.
On paper, this is a bilateral story.
In practice, it may not be.
For India, the real issue is not what the United States exports to Bangladesh. It is what Bangladesh might eventually export to India — and in what form.
What the Deal Means for U.S. Farm Exports
The agreement locks in preferential treatment for U.S. wheat, soybeans, soy oil, dairy products, beef, poultry, tree nuts, fruit, and cotton. Bangladesh has pledged to recognize U.S. regulatory certifications and ensure that its SPS measures are science-based rather than protectionist.
Commercial understandings referenced alongside the agreement point to agricultural purchases — including wheat, soy, and cotton — valued at an estimated $3.5 billion.
For American grain traders and oilseed exporters, Bangladesh’s 175-million-person market is now easier to enter. For India, however, the concern lies downstream.
Bangladesh is not just a consumption market. It is also a processing and re-export platform within South Asia.
The SAFTA Loophole Anxiety
India and Bangladesh are both members of the South Asian Free Trade Area. Under SAFTA, least-developed members such as Bangladesh enjoy preferential tariff access to India, provided goods meet rules-of-origin criteria — typically 30–40 percent value addition or substantial transformation.
The theory is simple: goods must genuinely originate in the exporting country.
The practice is murkier.
If U.S. soybeans are crushed into oil in Bangladesh, or U.S. wheat milled into flour, or dairy inputs processed into packaged food, do they qualify as Bangladeshi origin? In many cases, yes — if the value-add thresholds are met and tariff classifications change.
That is where India’s agricultural sensitivities come into play.
India remains structurally vulnerable in edible oils. The country imports over 60 percent of its edible oil consumption. Domestic oilseed farmers already struggle with price volatility. A scenario in which competitively priced U.S. soy oil enters Bangladesh, is processed, and then routed to India at concessional SAFTA tariffs is not far-fetched.
The same logic could apply to poultry feed, processed dairy inputs, and speciality grains.
Trade economist Prof. Biswajit Dhar puts it bluntly:
“India needs to strengthenthe rules of origin, and strict vigil must be kept at the ports, which is lax at the moment. If not, there is a possibility of American agricultural products entering the country.”
His warning is not rhetorical. It reflects longstanding concerns about enforcement capacity.
Port Vigilance and Past Precedents
Indian customs enforcement under preferential trade arrangements has often been uneven. Verification of value addition is paperwork-heavy and vulnerable to under-invoicing or creative accounting.
While outright transhipment — simple repackaging of U.S. almonds or lentils and shipping them to India — would not qualify under SAFTA, intermediate processing changes the equation.
And Bangladesh’s industrial base is expanding.
The country already operates significant agro-processing and food packaging facilities. If U.S. agricultural commodities enter at scale under preferential tariffs and reduced SPS friction, Bangladesh could evolve into a regional processing hub.
That would alter the competitive landscape for Indian farmers, particularly in oilseeds and feed inputs.
The Cotton Dimension
Cotton adds another layer.
Bangladesh’s garment industry is the world’s second-largest exporter of ready-made garments. It imports almost all of its raw cotton. The U.S. is already a key supplier, and the new agreement locks in favourable conditions.
If American cotton becomes more competitive relative to Indian cotton, Bangladesh’s mills could shift sourcing patterns. Indian cotton exporters — already squeezed by domestic procurement policies and global price volatility — would face additional headwinds.
Given that India and Bangladesh compete in global apparel markets, lower input costs in Dhaka translate into sharper competition for Indian manufacturers downstream.
The impact would be indirect but real.
Bangladesh–India Trade: The Baseline
Bangladesh exports roughly $1.8–2 billion worth of goods to India annually. Agricultural and agro-processed items include fish, jute products, processed foods, and select edible oil shipments.
India’s exports to Bangladesh are far larger, particularly in rice, wheat, sugar, onions, and cotton. The trade balance favours India.
But that surplus does not eliminate sectoral vulnerabilities.
Trade flows do not need to be large to be disruptive. A few hundred thousand tonnes of competitively priced edible oil or feedstock entering through preferential channels can depress domestic prices in sensitive states.
Farm politics in India is rarely forgiving.
Strategic Undercurrents
The agreement is not limited to tariffs. Bangladesh has also committed to aligning more closely with U.S. economic security priorities, including cooperation on export controls and addressing below-market practices by third countries.
This embeds Bangladesh more firmly within U.S.-led supply chain frameworks.
For India, the geopolitical implications are mixed. Closer U.S.–Bangladesh ties may dilute China’s leverage in Dhaka. But preferential U.S. agricultural access creates competitive distortions within South Asia.
India itself has resisted deeper agricultural concessions in trade negotiations — from the Regional Comprehensive Economic Partnership to bilateral FTAs — precisely because of rural sensitivities.
Now, it faces a scenario in which concessions granted by Dhaka to Washington could indirectly test India’s own trade defences.
The Policy Test for New Delhi
The response need not be confrontational. But it cannot be complacent.
First, India will need stricter enforcement of SAFTA rules of origin, including digital tracking of value chains and stronger post-clearance audits.
Second, customs vigilance at ports must be tightened — not selectively, but systematically.
Third, India may have to revisit its edible oil and oilseed strategy. Dependence creates vulnerability. Vulnerability invites pressure.
The U.S.–Bangladesh deal is not a direct assault on Indian agriculture. It is subtler than that.
It is a structural shift in incentives — one that could, if left unattended, open side doors rather than front gates.
Trade agreements rarely cause immediate shocks. They reshape supply chains quietly and incrementally. And by the time farmers notice, the shipments have already arrived.