Export pricing in preferential and non-preferential markets
Bangladeshi apparel exporters receive lower prices in the U.S. market than in the EU, even after accounting for firm and product characteristics, with exchange-rate movements having a stronger effect on pricing in the U.S. The findings suggest that Bangladesh’s reliance on low-price competitiveness may become increasingly difficult to sustain as the country approaches LDC graduation and faces reduced EU trade preferences.
-
Razzaque-Rahman-Islam-Chowdhury-Policy-Brief-March-2026.pdf
PDF document • 2.06 MB
- Bangladeshi apparel exporters receive lower unit value prices in the U.S. market than in the EU, controlling for product, firm, and market characteristics.
- Exchange-rate pass-through is incomplete in both markets, consistent with pricing-to-market (PTM) behaviour, but the response is 15% to 16% stronger in the U.S.
- Larger firms and those with broader market reach command higher prices; multi-product exporters show greater pricing flexibility across destinations.
- Firm characteristics shape price levels but do not alter PTM responses; the pricing adjustment to exchange-rate movements is broadly shared across all firm types.
- These findings carry direct implications for Bangladesh's export competitiveness as it approaches LDC graduation and the erosion of EU preferential access. Competitiveness in the U.S. market has historically hinged on low prices; however, sustaining such a strategy risks significant profit erosion in the EU market, where pricing conditions and competitive dynamics differ.