Originally posted in NewAgeBD on 6 September 2026
High tariff protection hinders export diversification: study
High tariff protection for local industries is making it harder for Bangladesh to diversify its exports beyond ready-made garments while also discouraging investment in export-oriented sectors, according to a government study.
The average import tariff on finished goods in Bangladesh stood at 43.05 per cent, nearly three times the 16.09 per cent tariff on imported inputs, finds the study by the Bangladesh Foreign Trade Institute, which operates under the commerce ministry.
The 26.96-percentage-point gap made selling products in the protected domestic market more profitable than exporting, it says.
The BFTI recently submitted the study report, titled ‘Impact Assessment of Anti-Export Bias on Export Diversification of Bangladesh’, to the Bangladesh Trade and Tariff Commission.
The average import duty was 14.1 per cent in FY2024-25. But after para-tariffs, or additional charges on imports, were included, the overall protection for domestic industries rose to 28.15 per cent, the study found.
It said that regulatory duty, supplementary duty, advance income tax, advance tax and other import-related charges substantially increased protection beyond customs duty.
Experts said the findings exposed a longstanding policy contradiction: the government wants to diversify exports while offering businesses stronger incentives to produce for the protected domestic market.
They called for harmonising trade and tariff policies and reducing dependence on import duties ahead of Bangladesh’s graduation from the least developed country category.
The report reveals that higher duties on finished imported goods raised their domestic prices and protected local manufacturers from foreign competition, while taxes on raw materials, intermediate goods and capital machinery increased exporters’ production costs.
Exporters could not pass the additional costs on to overseas buyers as they had to compete at international prices, the study said.
Protected manufacturers could charge higher prices locally without developing the productivity and quality needed to compete globally.
The combination encouraged investment in import-substituting production instead of export-oriented industries, particularly outside the RMG sector, it observed.
The report reveals that the average input tariffs remained between about 13 per cent and 16 per cent during FY15–FY25, while output tariffs stayed above 40 per cent.
The difference generally ranged between 27 percentage points and 35 percentage points, showing the persistent anti-export bias in Bangladesh’s trade regime.
Although merchandise exports increased from $34.8 billion in FY17 to $48.3 billion in FY25, the export basket remained highly concentrated. RMG products accounted for 81.49 per cent of total export earnings in FY25.
Eight broad product groups, including woven garments, knitwear, home textiles, fish, agricultural products, jute goods, leather and footwear, and engineering products, earned $44.17 billion, representing 91.48 per cent of merchandise exports.
The study identified leather and footwear, jute goods, agro-processing, fisheries, pharmaceuticals, plastics, light engineering, electronics, furniture and home textiles among sectors constrained by tariff and institutional barriers.
Despite their export potential, the sectors faced high input costs, inadequate incentives, limited bonded-warehouse facilities, weak trade finance, complicated regulations and poor integration into global value chains.
Total tax incidence ranged between 89 per cent and 442 per cent for motorcycles, 116 per cent and 127 per cent for furniture, and 104 per cent and 120 per cent for plastic goods.
The study’s time-series analysis found a negative long-term relationship between anti-export bias and export diversification.
It recommended a five-year tariff rationalisation roadmap, gradual reductions in excessive tariffs and para-tariffs, lower input duties and wider bonded-warehouse access for non-RMG industries.
It also proposed simplifying duty drawbacks, digitising trade documentation, implementing the National Single Window and modernising ports and border infrastructure.
Fahmida Khatun, distinguished fellow at the Centre for Policy Dialogue, told New Age that excessively high tariffs on imported goods alone could not ensure the long-term development of domestic industries as such protection discouraged entrepreneurs from moving beyond the domestic market and exporting their products.
She recommended gradually narrowing the tariff gap between final and intermediate goods to a rational level to strengthen industrial competitiveness.
Fahmida also urged the government to reduce its dependence on import duties before Bangladesh’s LDC graduation, when trade relations would increasingly become reciprocal and there would be little scope for imposing excessively high tariffs on finished goods or production inputs.
