Digital trade rules embedded in Bangladesh’s new agreement with the US may deprive Bangladesh of tax revenues and also limit the expansion of digital economy, say experts.

Under Section 3 of the trade deal, Bangladesh has agreed not to impose customs duties on “electronic transmissions” that refer to digital products and services delivered online. They include software downloads, music and video streaming, e-books, mobile apps, online gaming and cloud-based services.

Simultaneously, Bangladesh is pledge-bound to support the US push for a permanent global ban on customs duties on electronic transmissions, an issue that is likely to resurface at the 14th Ministerial Conference of the World Trade Organisation to be held in Cameroon on March 26-29.

Trade officials in Dhaka fear this provision could further restrict Bangladesh’s tariff policy in the digital sector.

Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue, suggested that Bangladesh, a net importer of digital services, should bring the issue to the table during the possible review of the trade deal with the US.

“We have no interest in keeping the moratorium on customs duties on electronic transmissions,” he said, adding that other developing countries want to lift the moratorium to unlock a revenue stream, and Bangladesh should do the same.

Under the agreement, Bangladesh has pledged not to introduce a digital services tax that “discriminates against US companies.” That may effectively protect US tech companies from local taxation on sales revenue generated from Bangladeshi users, limiting a future revenue source for the government.

Traditional international tax laws dictate that a company only pays corporate income tax in a country if it has a “physical presence” there, like a factory or a headquarters.

Today, big tech companies (often based in the US or Europe) can generate millions of dollars in revenue from users in a developing country without ever opening a local office. Digital service tax allows governments to bypass the physical presence rule and tax the gross revenue a company makes directly from local users.

Developing nations argue that their citizens are the ones generating value for these platforms -- Netflix, for example -- through their data, attention, and content use.

Experts say the digital trade provisions in the deal could undermine Bangladesh’s freedom in future digital policy and increase its reliance on US technology.

Abdur Razzaque, chairman of Research and Policy Integration for Development, said the deal was the outcome of a power-based negotiation.

“It has been imposed on us,” he said.

Signed on February 9, the agreement on reciprocal trade, as it is known, sets binding rules on taxation, data governance and digital trade. The commitments Bangladesh has made may curb its ability to shape its own digital economy as the sector expands.

The deal also bars Bangladesh from enforcing data localisation, which means authorities cannot force foreign firms to store or process personal and commercial data of Bangladeshi citizens within the country. Instead, the agreement guarantees unrestricted cross-border data flows, reducing Dhaka’s control over a growing pool of digital and commercial data.

Attention is also focused on enforcement provisions within the agreement that allow Washington to withdraw trade benefits and reimpose punitive tariffs if Bangladesh enters into digital trade arrangements with other countries, deemed detrimental to US interests.

Mostafa Abid Khan, a former member of the Bangladesh Trade and Tariff Commission, said the agreement refers to the possible restoration of President Donald Trump’s executive order issued on April 2, 2025, which had imposed a 37 percent tariff on Bangladeshi exports to the US.

Although the original executive order is no longer in force, experts say, the inclusion of these restrictive provisions in the signed agreement signals continuing leverage.

The provisions could also determine Bangladesh’s future technology choices. If Bangladesh turns to lower-cost telecom equipment from Chinese suppliers, for example, it may trigger US trade penalties and affect key export sectors such as garments.

“There is no other option but to review the agreement with the US,” Mostafa said.