LDC Graduation: Implications for Bangladesh’s Export-Focused Fisheries Industry

Bangladesh exports a variety of seafood products – from fish to shrimp and crab – which underpin livelihoods and foreign earnings. In 2024–25, the country’s fish and seafood exports earned around USD 296 million[1].

The industry is dominated by shrimp (notably Black Tiger prawns), with shrimp alone accounting for about roughly 80% of Bangladesh’s total seafood export value[2]. The European Union is the largest buyer of Bangladeshi shrimp, thanks to duty-free access under the LDC (Least Developed Country) trade regime[3]. As Bangladesh prepares to graduate from LDC status in 2026, there is growing concern about how the loss of LDC benefits will affect this export-oriented fisheries sector.

This analysis provides a before-and-after picture of the situation, examines WTO-related implications, and assesses the potential impacts on all segments of the industry – both quantitatively and qualitatively – to inform policymakers and businesses.

Current Benefits Enjoyed by Fisheries Exporters under LDC Status

As an LDC, Bangladesh’s fisheries exports currently enjoy exceptional advantages in global markets and policy flexibilities at home:

• Duty-Free Market Access:
Under initiatives like the EU’s Everything But Arms (EBA) scheme, nearly all Bangladeshi fish and seafood exports enter major markets tariff-free[4]. Frozen fish, shrimp, and related products from Bangladesh face 0% import duty in the EU, UK, Canada, Japan, Australia, and other partners granting LDC preferences.

This confers a critical price advantage. By contrast, if not an LDC, these products would typically face tariffs in the range of about 6–12% in the EU market[4]. The duty-free access has been pivotal, given that roughly two-thirds of Bangladesh’s exports (mostly apparel but also fishery products) go to preference-granting developed markets[5]. In short, LDC status shields fish exporters from tariffs that competitors often have to pay.

• Simplified Rules of Origin:
LDC exporters benefit from relaxed origin requirements. For instance, under EU EBA rules, a more lenient processing threshold is accepted. In the apparel sector this allows single-stage transformation[6]; in fisheries, it means tolerant content rules for processed fish products. These flexible rules make it easier for Bangladesh’s seafood to qualify for zero tariffs even if production involves imported inputs, thus facilitating higher utilization of trade preferences.

• Export Incentives and Subsidies:
The Bangladeshi government currently provides cash incentives to promote agricultural and fishery exports. For seafood, this includes a cash subsidy of about 7–10% on frozen shrimp exports and 2–5% on frozen fish exports[7]. Other related supports exist for crabs and certain marine products. As an LDC, Bangladesh has been able to grant these export subsidies with relative impunity – WTO rules prohibit export subsidies in general, but LDCs are exempt, and even other low-income developing countries get special leeway[8][9].

These incentives directly boost exporters’ profit margins or allow them to offer more competitive prices abroad. So far, no WTO member has challenged Bangladesh’s subsidies on fish exports, in part due to its LDC status and low-income designation[9].

• International Support and Capacity Building:
Bangladesh’s LDC status has opened doors to technical assistance programs targeted at boosting trade capacity. The fisheries sector has benefited from aid-for-trade initiatives (e.g. through the Enhanced Integrated Framework) that support quality improvement, sanitary standards, and value chain development[10][11]. LDC-focused training and priority access to development projects have helped address some supply-side constraints.

Additionally, development partners often offer favorable financing for LDCs. All these have indirectly supported fisheries (for example, improving testing labs for fish export or training in aquaculture best practices), thereby enhancing the sector’s export readiness.

In summary, current LDC-derived facilities – zero tariffs abroad, subsidies and policy flexibilities at home, and dedicated international support – have collectively fueled the growth of Bangladesh’s fisheries exports. These benefits have helped the country become one of the top 10 global suppliers of frozen shrimp[12], despite the sector’s relatively small share in Bangladesh’s overall exports (~0.9% of total exports by value). The challenge ahead lies in how these privileges change once Bangladesh graduates.

Changes Upon LDC Graduation: Lost Preferences and New Constraints

Bangladesh is slated to graduate from LDC status in November 2026[13], after which a “smooth transition” period will apply for certain trade benefits. For the EU and some other partners, Bangladesh will continue to enjoy duty-free access for three additional years beyond 2026[14]. Nonetheless, the clock is ticking. The post-graduation scenario will bring several important changes:

• Loss of Duty-Free Access (Higher Tariffs):
Once transitional periods lapse, Bangladeshi fish and seafood exports will be subject to normal tariff schemes. In the EU market, this means moving from EBA to the standard GSP unless Bangladesh qualifies for a special arrangement. Under standard GSP, many seafood items will incur tariffs. For instance, frozen fish fillets that were 0% under EBA could face around 10–12% duty, and certain frozen crustaceans would see tariffs of roughly 7–11%[4].

If Bangladesh fails to meet GSP+ criteria or other trade deals, the tariffs could even revert to MFN rates. Other markets will see similar shifts: Canada’s tariffs could jump to 16–18% on some processed fish and shrimp products[15], while Japan’s shrimp tariffs might rise to the mid-single digits[16].

The bottom line is a notable erosion of Bangladesh’s tariff preference margins – an average tariff increase estimated at about 8.9 percentage points for Bangladesh’s exports overall[17]. For fishery products specifically, experts project tariff increases of around 6–10% in key markets absent new arrangements[4].

• Stricter WTO Rules on Subsidies:
Upon leaving the LDC category, Bangladesh must comply with the full discipline of WTO subsidy rules. Export subsidies that were tolerable for an LDC will become prohibited for Bangladesh as a developing country[18]. Bangladesh’s cash incentives to shrimp and fish exporters will thus fall foul of Article 3.1(a) of the SCM Agreement once graduation takes effect[8][18].

Although Annex VII of the SCM Agreement provides a temporary exemption based on per capita income[19], Bangladesh is nearing this threshold. In practice, the scope to maintain export subsidies will be extremely limited. Continuing such incentives could invite WTO challenges, forcing their withdrawal[9][18].

• “Before vs After” Snapshot:

• Now (LDC):
  • USD 1 million shrimp shipment to the EU
  • 0% EU tariff
  • 10% cash subsidy (~USD 100,000)
  • Simplified rules of origin
• Post-Graduation:
  • ~10% EU tariff
  • No cash subsidy
  • Stricter compliance requirements

The combined effect is a squeeze on margins from both ends.

• Rules of Origin and Compliance:
Post-graduation, trade policy conditions will toughen. Under standard GSP, rules of origin may be more restrictive than under EBA. While this primarily affects manufacturing sectors[6], fisheries exporters may also face stricter documentation and compliance demands.

• Implication of New WTO Fisheries Subsidies Agreement:
The WTO Agreement on Fisheries Subsidies (MC12, 2022) prohibits support that contributes to IUU fishing and overfishing[22][23]. LDCs receive grace periods[24], but Bangladesh will need to implement these disciplines sooner after graduation. Existing support measures—such as fuel subsidies, concessional loans, or tax incentives for trawlers (~USD 21 million)—may face scrutiny[18].

Anticipated Impacts on the Fisheries Industry – A Before-and-After Analysis

1. Export Competitiveness and Market Share:
The most immediate effect of LDC graduation will be reduced price competitiveness of Bangladeshi fishery exports in key markets. When tariffs kick in (e.g., ~10% in the EU), importers may find Bangladeshi products relatively more expensive and could shift sourcing to countries with better terms.

• Competitor advantage: Vietnam, with an FTA with the EU, is phasing out tariffs on its seafood exports, giving it an edge over Bangladesh[25].
  • India and Thailand may face similar tariffs as Bangladesh, but often have more advanced production systems, allowing lower costs.
• Quantitative impact: Various studies predict Bangladesh’s total exports could decline by 8–14% due to LDC graduation[26][17]. For fisheries, WTO simulations suggest a ~10% drop in fish and fish products by value[27].
  • One scenario: Bangladesh’s fish exports could shrink by 10.2% (~USD 164 million) due to lost preferences[27]; worse-case estimates reach –13.9%[28].

2. Industry Segments and Value Chain Effects:
All segments of the fisheries export value chain are vulnerable, though impacts will differ:

• Shrimp Aquaculture Farmers:
  • Black Tiger shrimp are mostly produced by small-scale farmers in coastal areas.
  • Exporters facing tariffs and no subsidies may offer lower prices for raw shrimp.
  • Impact: Reduced farm-gate incomes; 40% of wild-caught shrimp and 95% of farmed shrimp are exported[29].
• Fishers and Coastal Communities:
  • Wild catch fisheries (e.g., marine fish, Hilsa, crabs) could see weakened demand or greater quality pressures.
  • Diversion of exports to the domestic market may depress local fish prices, affecting fishermen’s incomes.
• Processing and Export Firms:
  • Bangladesh has 76 EU-approved fish processing plants[29].
  • Exporters will face thinner margins due to tariffs and loss of cash incentives (5–10%).
  • Smaller or less efficient processors may struggle; short-term industry consolidation is possible.
• Ancillary Sectors:
  • Ice suppliers, packaging, cold storage, and logistics may feel an indirect pinch from any contraction in export volumes.
  • Reduced government subsidies may also limit support for seafood processing parks or technology upgrades.

3. Employment and Social Impact:

• The fisheries sector supports ~18 million people, including 1.4 million women, across fishing, farming, and related activities[31].
• A downturn in export-driven demand could lead to job losses, particularly in rural and coastal regions.
• Reduced shrimp farming profitability could reverse poverty alleviation gains, forcing some farmers to switch back to lower-income crops.

4. Quality, Standards, and Value Addition – A Need to Compete Differently:

• Opportunities:
  • Stricter competition pressures can catalyze improvements in quality control, SPS compliance, traceability, and certifications (ASC, MSC, ISO)[32].
  • Investment in value-added seafood (ready-to-cook, canned, or seasoned products) could offset tariff disadvantages.
• Challenges:
  • Meeting higher standards requires financial and technical investment, which may be difficult for smaller operators.
  • Success could position Bangladesh to export more premium and value-added seafood, enhancing resilience.

5. Other Trade Partners and Market Diversification:

• Regional and South-South Markets:
  • Opportunities exist in China, South Korea, the Middle East, and India (subject to bilateral terms)[33].
  • Post-graduation, Bangladesh could negotiate FTAs or preferential access to maintain competitiveness.
• Maintaining EU/UK Market via GSP+:
  • Applying for EU GSP+ or the UK’s Enhanced Preferences scheme could retain zero-duty access.
  • Eligibility depends on governance, sustainability criteria, and Bangladesh’s share of EU imports[14].
• Impact on Other Trade Partners:
  • The US market may see negligible tariff impact due to historically low MFN rates.
  • Middle Eastern markets like Saudi Arabia or UAE remain largely accessible if exporters meet quality standards[35].

In essence, the fisheries sector’s future will depend on how well Bangladesh navigates this transition. The quantitative impact – potentially a drop in export earnings and volume – could be mitigated if new trade deals or GSP+ can be secured, and if the industry upgrades to retain buyers despite higher costs. Qualitatively, the pressure to improve standards, sustainability, and move up the value chain could transform the sector, for better or for worse.

For Policymakers:

1. Negotiating Trade Arrangements:

• Apply for the EU GSP+ scheme and ensure Bangladesh meets governance and sustainability criteria to retain duty-free access in Europe[36].
• Finalize ongoing FTA talks with countries like Japan and China, securing low or zero tariffs for fisheries products.
• Explore regional trade pacts (e.g., BIMSTEC FTA or SAFTA concessions) to keep nearby large markets open[37].
• Engage with the UK’s Developing Countries Trading Scheme (DCTS) to maintain enhanced preferences for fishery exports.

2. Reforming Subsidy Support:

• Shift from direct export subsidies to production and capacity-building subsidies, which WTO rules permit (e.g., cold storage, aquaculture technology, disease control)[38][39].
• Provide targeted subsidies that are non-actionable under WTO rules, such as grants or low-interest loans for sustainable fishing practices and facility upgrades[40].
• If feasible, establish an adjustment fund to cushion social and economic impacts, retrain workers, or help small farmers diversify.

3. Enhancing Quality and Compliance Infrastructure:

• Upgrade laboratories for SPS testing to meet EU/US food safety standards.
• Strengthen the Fishery Department to maintain confidence in certifications for processing plants.
• Promote sustainability and traceability in fisheries, including better data on fish stocks, regulated catch sizes, and combating IUU fishing[41].
• Market eco-friendly or certified seafood products to appeal to global buyers.

4. Capacity Building and Transition Assistance:

• Leverage WTO and UN support programs available to graduating LDCs (e.g., EIF provisions)[42][43].
• Provide training and extension services for shrimp farmers and fishermen to improve yield and reduce costs.
• Consider social safety nets for those most at risk, such as alternative livelihood programs (seaweed farming, eco-tourism) or temporary cash assistance.

For Businesses in the Fisheries Sector:

1. Upgrade Value Addition and Diversify Products:

• Move up the value chain by producing processed, consumer-ready seafood products (e.g., marinated fillets, ready meals).
• Diversify into new species or product lines (crab meat, fish maw, dried fish snacks) to reduce reliance on any single tariff schedule.

2. Market Diversification:

• Expand into emerging markets such as China, the Middle East, and North America.
  • Develop partnerships, joint ventures, or agents who understand local markets.
• Leverage branding of unique products (e.g., Hilsa or organic shrimp) to command premium pricing.

3. Operational Efficiency and Technology:

• Invest in modern processing equipment to reduce waste and improve yield.
• Explore economies of scale through mergers or consortiums.
• Optimize logistics and cold chain to reduce post-harvest losses.
• Consider energy efficiency and alternative energy solutions, like solar-powered cold storage.

4. Quality Branding and Storytelling:

• Differentiate products via geographical branding (e.g., “Hilsa from Bangladesh”).
• Promote ethical sourcing and community benefits to justify higher prices.

5. Collaboration and Advocacy:

• Work together through industry associations (e.g., Bangladesh Frozen Foods Exporters Association) to lobby for supportive policies.
• Share best practices and engage with foreign buyers to assure them of quality despite changes in tariff status.

Both policy initiatives and business strategies need to be well-coordinated. The government’s efforts to secure trade deals or extend preferences will complement businesses’ efforts to upgrade and diversify – one without the other would yield suboptimal results.

Conclusion

Bangladesh’s impending graduation from LDC status is a double-edged sword for its export-facing fisheries industry. On one hand, it reflects the country’s progress; on the other, it heralds the end of certain privileges that the industry has relied on for competitive success.

The “before” picture was one of tariff-free access and policy flexibility, fueling steady export growth in shrimp and fish products. The “after” picture threatens higher tariffs, withdrawal of export subsidies, and stiffer global competition. The likely impacts – a squeeze on profit margins, potential export declines, and pressure on small producers – are cause for concern, but they can be managed with timely action.

For policymakers, the task is to craft a smooth transition: negotiating substitute trade arrangements, refocusing subsidies into permissible support, and strengthening the industry’s fundamentals (from quality standards to sustainable practices)[41]. For businesses, the task is equally challenging: cutting costs through efficiency, climbing the value ladder, and expanding into new markets to reduce dependency on any single trade privilege.

Both must work in tandem, using the remaining transition years wisely to reorient the fisheries sector for a more competitive era[44]. If successful, Bangladesh’s fisheries industry can continue its growth trajectory, retaining its vital role in the economy and livelihoods – not by the grace of special treatment, but by its inherent strengths in production, quality, and entrepreneurship.

By anticipating the changes and adapting proactively, Bangladesh can turn LDC graduation from a looming threat into an opportunity to upgrade its fisheries sector for long-term sustainability and prosperity, ensuring that the “Blue Economy” remains a vibrant contributor in the post-LDC chapter of Bangladesh’s development story.

Author

This article was authored by Priyo Pranto, Senior Business Consultant at LightCastle Partners. For further clarifications, contact here: [email protected]. 

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