Bangladesh Poised to Overtake China As Top Apparel Supplier to EU

The face of global apparel manufacturing is changing. As countries like China become more expensive for manufacturing, companies are taking their business elsewhere. Some are finding ways to create products in the U.S. through new automation technology, and others are moving to places like Ethiopia.

The biggest shift, however, has been to Southeast Asia. And that's more prevalent as ever, as Bangladesh is poised to overtake China as the European Union's largest apparel supplier by 2020.

According to the American Journal of Transportation (AJOT), EU apparel imports from Bangladesh have risen for the last nine years consecutively from 12.2 percent to 23.4 percent.

In comparison, China's imports have decreased as the country struggles with rising costs of labor.

In 2010, more than half of EU apparel imports came from China. In 2016, only a third did. To compensate for this decline, Chinese exporters have cut prices by as much as 8.2 percent to be more attractive.

So, why is Bangladesh becoming the new go-to source for apparel? There are a couple of reasons.

First and foremost, Bangladesh can export apparel products to the EU duty-free thanks to the EU's Generalized Scheme of Preferences (GSP) Everything But Arms (EBA) agreement. Under this agreement, imports to the EU from the Least Developed Countries (as laid out by the UN) are duty-free and quota-free. This came into place in 2001.

The second appeal of Bangladesh is the price. Last year, Bangladesh was the second-cheapest supplier of apparel to the EU (Pakistan being No. 1), and it was the cheapest supplier among the leading 10 suppliers in 12 apparel categories, AJOT reported.

Bangladesh still has a daunting list of problems to address before it can fully lead the world's apparel manufacturing. Human rights violations and dangerous work conditions still plague the country. And while initiatives like the Bangladesh Accord on Fire and Building Safety are working to end these issues, they still exist today.