India-EU FTA and the fibre divide, why Bangladesh, Vietnam and Pakistan face a new contest

India and the European Union concluded a historic Free Trade Agreement (FTA) that aims to eliminate or sharply cut tariffs on nearly all goods traded between the two partners, opening up a €263.5 billion textile & apparel import market for Indian exporters through zero-duty access across all textile and clothing tariff lines.

The textile sector intrinsically linked to fibres and yarns  is one of the most globally competitive industries, with supply chains stretching from raw cotton and MMF production through spinning, weaving/knitting, and garment finishing. As tariffs decline under the new FTA, fibre and yarn inputs will play a central role in reshaping South and Southeast Asia’s sourcing competitiveness.

Historically, India has faced a tariff disadvantage in the EU market relative to key competitors like Bangladesh, Vietnam, and Pakistan, who often enjoyed preferential duty status. The removal of this gap promises to disrupt current trade flows and market shares in both cotton-based and MMF-based textile products.

India’s fibre and yarn export context

India is both a major producer and exporter of cotton and plays a significant role in global yarn supply chains. According to export statistics, India’s raw cotton and cotton yarn exports have shown strong growth, with raw cotton exports rising by around 79.9 per cent and cotton yarn by over 83 per cent in recent years, reflecting the strength of its upstream capabilities.

Table: India’s selected fibre/yarn export values (Apr–Mar 2023-24)

Source: TEXPROCIL / DGCI&S – India export stats

India’s upstream value chain from cotton to yarn continues to consolidate export volumes. Bangladesh remains a dominant destination for Indian yarn and raw cotton due to its garment-centric manufacturing model that imports raw materials. With the EU FTA eliminating textiles tariffs, India’s upstream strength could be redirected towards value-added European markets, especially where cotton content is high.

Bangladesh yarn imports and export dependencies

Unlike India, Bangladesh imports nearly all its raw cotton and much of its yarn to feed one of the world’s largest garments export industries. Bangladesh’s textile and apparel exports have been heavily reliant on duty-free preferences such as the EU’s Everything But Arms (EBA) scheme (now replaced by full FTA status for India), which allowed significant export volume into Europe.

Table: Bangladesh textile sector indicators (2025-26)

Bangladesh’s textile economy is highly dependent on imported fibres and yarns particularly cotton as domestic production is negligible; it must import nearly all its raw textile inputs. This business model oriented around garment assembly has been competitive when Bangladesh enjoyed tariff advantages in the EU. With India now under the FTA, Bangladesh’s cost advantage on tariffs diminishes, compressing margins unless it sources competitive inputs or scale efficiencies.

Vietnam MMF strength, raw material sourcing, and export orientation

Vietnam’s strengths lie not only in labour-intensive garment production but also in man-made fibre (MMF) and synthetic garments, segments where raw materials like polyester and viscose fibers play a greater role. Vietnam typically sources significant fibre inputs externally, especially for MMFs, due to limited domestic production.

Table: Vietnam fibre/yarn profile as of 2026

As global yarn trade shifts with man-made fibres accounting for approximately 65 per cent of trade value Vietnam’s MMF-intensive export strategy positions it differently from India and Bangladesh. The India-EU FTA mainly influences tariff costs but does not directly change raw material sourcing for MMF, meaning Vietnam’s competitive advantage in synthetic textiles remains robust. Unless India also scales MMF fibre production, Vietnam is likely to retain edge in MMF yarn segments.

Pakistan: Cotton heritage with limited value chain depth

Pakistan remains a significant cotton producer and exporter of cotton textiles, including yarn and fabrics, to key markets including the EU. But historical structural shifts have seen textile industrial relocation towards Bangladesh and Vietnam, impacting Pakistan’s textile export growth over time.

Comparative export framework: Cotton vs MMF in EU markets

A critical dimension in comparing India, Bangladesh, Vietnam, and Pakistan is the fibre mix cotton versus MMF

Table: Fibre/Yarn export comparison

India’s cotton ecosystem, stretching from raw production to yarn, contrasts with Bangladesh’s import-heavy model. Vietnam’s focus on MMF matches global fibre trade patterns where MMF dominates (around 65 per cent of total volume). Pakistan’s cotton strength is notable but its value chain and global buyer integration lag compared to Vietnam.

Strategic implications of the India–EU FTA

With the FTA removing tariffs that once constrained Indian textile exports into the EU while competitors like Bangladesh and Pakistan enjoyed preferential entry, several strategic implications emerge:

• Neutralising tariff disadvantages: India’s exporters can now compete without the prior tariff handicap, coordinating textile exports with upstream cotton/yarn production to drive cost competitiveness.
• Bangladesh recalibrates sourcing: Bangladesh may need to secure cheaper or alternative raw material routes or negotiate competitive pricing with upstream suppliers now that India competes tariff-free.
• Vietnam’s MMF edge remains: Vietnam’s emphasis on MMF positions it well in Europe for synthetic and technical textiles segments likely to grow globally.
• Pakistan’s market share contest: Pakistan’s cotton-based exports remain relevant, but it may face intensified competition from Indian counterparts with tariff equivalence.

The India-EU FTA is a shift in global textile trade economics, particularly in fibres and yarns the backbone of the upstream textile value chain. India’s competitive position gains renewed vigor due to zero-duty access, contrasting with Bangladesh’s import-dependent system, Vietnam’s MMF focus, and Pakistan’s cotton production legacy. Each country’s raw material structure whether cotton or MMF will shape how it leverages EU market access in a post-FTA world. India’s upstream advantages, backed by integrated cotton inputs and growing MMF ambitions, could see its share of EU fibres and yarn trade grow over the coming decade if coupled with compliance, logistics, and operational excellence.