As Bangladesh approaches its graduation from the Least Developed Countries (LDCs), the policy concern has focused mainly on one issue: market access. Once preferential treatment comes to an end, exporters may face higher tariff barriers in major destinations, which could potentially weaken their competitiveness and stifle export growth.
That concern is justified. But it captures only part of the challenge. New evidence from Bangladesh’s apparel exports, as explored in our paper titled, “Export Pricing in Preferential and Non-Preferential Markets” suggests that the erosion of trade preferences may affect exporters through two channels, not one (Razzaque et al., 2026). The first is the familiar one, reduced market access. The second is less visible but no less important: lower price realisation, meaning the prices exporters are actually able to secure in foreign markets. The question, therefore, is not only whether Bangladesh will continue to sell, but whether it will continue to sell at prices that sustain margins, reinvestment, and upgrading.

This insight emerges from an analysis of Bangladesh’s customs data covering 2010 to 2023, with more than 161,000 firm-product-destination-year observations at the HS 8-digit level. The study compares how firms price similar apparel products across two major destinations operating under very different trade regimes: the European Union, where Bangladesh has enjoyed duty-free access under Everything But Arms, and the United States, where apparel exports continue to face MFN tariffs, often in the range of 12 to 15%.

The central finding is striking. The econometric estimates point to a large and persistent conditional price wedge between the two markets. Depending on the specification, Bangladeshi apparel exporters receive FOB unit values that are roughly 5-18 percent lower in the US market than in the EU, after controlling for observable destination factors and detailed firm-product heterogeneity. This should not be read as meaning that identical garments are always sold in the United States at half the European price. Rather, it suggests a substantial average pricing disadvantage in the US market within the sample, reflecting the combined influence of tariff conditions, market structure, buyer bargaining, and residual differences in product composition and quality.

This is not merely a regression result floating in isolation. Simpler comparisons in the data point in the same direction. For major products such as T-shirts and trousers, average export prices are consistently higher in leading EU markets, such as Germany, than in the United States. The pattern remains visible even among firms serving both markets. In other words, the gap does not simply arise because one set of firms sells to Europe and another to America. A broad pricing disadvantage persists within the data itself.

There is also clear evidence of pricing-to-market, a technical term for something quite intuitive. Exporters do not pass exchange-rate changes through fully into foreign prices. Instead, they absorb part of the shock in their margins. In the EU market, a 1 percent depreciation of the taka is associated with only about a 0.41 to 0.45 percent rise in export prices measured in taka. More interestingly, this response is stronger in the United States, where the degree of local-currency price adjustment is about 15 to 16 percent higher than in the EU. Put simply, firms appear to adjust their mark-ups differently across destinations, rather than following a single pricing rule everywhere.

This matters for policy because it shows that trade preferences shape more than tariff incidence at the border. They also seem to influence the prices exporters are able to command. In the EU, preferential access may be associated with better price realisation. In the US, where the tariff regime is less favourable, exporters appear to face a more difficult pricing environment. That difference may reflect several overlapping factors, but the policy message is hard to miss: when preferences weaken, the loss may show up not only in export volumes, but also in export prices.

The firm-level evidence adds another layer. Larger firms, firms serving more markets, and firms with a stronger orientation toward woven rather than knitted products tend to secure higher prices. Yet these characteristics do not appear to alter pricing-to-market behaviour in a systematic way. Stronger firms receive better prices, but they do not fundamentally escape the broader pricing pressures associated with destination-specific market conditions. One additional finding is especially suggestive: multi-product firms show clearer evidence of destination-specific pricing than single-product firms, indicating that broader product scope may provide more room for strategic adjustment.

Several policy implications follow.

First, Bangladesh’s post-LDC challenge should not be seen narrowly as a tariff issue. If preference erosion affects both market access and price realisation, then the costs of graduation may be larger than conventional tariff calculations suggest.
Second, securing favourable post-LDC market access remains critical. The importance of a successful transition into the EU’s GSP+ regime, and of improving access in other major destinations, becomes even greater if more favourable trade regimes also support better prices.
Third, exchange-rate adjustment can help, but only to a point. Currency depreciation may raise local-currency export earnings, yet it cannot substitute for market access or deeper competitiveness, especially when firms absorb much of the exchange-rate movement into margins.
Fourth, firm upgrading matters. Scale, market reach, product sophistication, compliance capacity, design capability, and logistics performance all become more important in a world where exporters cannot rely indefinitely on tariff preferences alone.
Bangladesh’s export debate has long focused, understandably, on volumes, growth, and market share. Those indicators still matter. But as the external environment becomes less forgiving, one additional question deserves much greater attention: at what prices are Bangladeshi firms selling, and what do those prices imply for long-term competitiveness?

That question may become central in the post-LDC era. Because when trade preferences erode, export prices can erode too.


Reference:
Razzaque, M. A., Jillur, R., Islam, S., & Chowdhury, A. (2026). Export Pricing in Preferential and Non-Preferential Markets: Firm-Level Evidence from Bangladesh’s Apparel Exports in the Context of LDC Graduation. Research and Policy Integration for Development (RAPID), with support from International Growth Centre (IGC).