The graduation of Bangladesh, Lao PDR, and Nepal have been scheduled for November 2026. Bangladesh’s recent request for a deferral to 2029 highlights the structural difficulties of losing 'Everything But Arms' (EBA) status. Overall, preference erosion is estimated to threaten approximately US$7-10 billion in annual export earnings for the region, based on estimates generated using the Trade Intelligence and Negotiation Adviser (TINA) platform. Most major preference-givers have now harmonized around a three-year grace period, effectively extending LDC-level benefits until late 2029 for the 2026 graduates. But it is essential that extended market access must be accompanied by assistance to support productive capacity, diversification and value addition. 

Preference schemes for Asia and the Pacific are evolving

For exporters in Asia and the Pacific, the most commercially relevant unilateral preference schemes remain the EU Generalized System of Preference (GSP) family and the UK Developing Countries Trading Scheme (DCTS), followed by Japan’s GSP. Canada, China, Australia, New Zealand and Republic of Korea are also important for specific users, especially LDCs and Pacific economies. The US GSP program remains expired, forcing Asian developing countries to pay  Most Favoured Nation (MFN) tariffs rates. While the African Growth and Opportunity Act (AGOA) was temporarily extended through December 2026, no equivalent 'Asia-Pacific Trade Act' has emerged, leading to a 'preference gap' compared to African and Latin American counterparts.

Source: authors, based on various sources, including EU, UK DCTS, and Japan MOFA.

The EU’s new GSP Regulation (2027–2034) introduces a modernized GSP+ tier. For Asia-Pacific economies, the removal of the 'import-share' vulnerability cap is a significant victory, potentially allowing larger economies like Bangladesh to enter GSP+ immediately following their EBA transition. However, meeting an extended list of strict labor and environmental benchmarks will pose a significant challenge to new GSP+ entrants. Bangladesh’s recent ratification of ILO Conventions 155, 187 and 190 is an important milestone. However, GSP+ eligibility will depend not only on ratification but also on implementation, including progress on labour rights, inspection and freedom of association.

In a major strategic pivot, China operationalized its 100% zero-tariff coverage for all LDCs in late 2024. Throughout 2025, this has significantly boosted agricultural exports from Southeast Asia through the 'Green Channel' for SPS facilitation. This move positions China as a critical alternative market as Western preferences become increasingly tied to non-trade conditionalities.  Yet graduating Asian LDCs may see their applicable tariffs rise as China does not offer a fallback option like GSP+. 

Way forward: From unilateral reliance to reciprocal regionalism

To mitigate the impact of preference erosion and harness new opportunities, ESCAP LDCs and other developing countries benefiting from unilateral preference schemes should adopt a multi-pronged strategy focused on structural transformation, regional integration and South-South trade.

As unilateral preferences face uncertainty, regional agreements can help fill the void, with graduating LDCs actively exploring bilateral and regional trade agreements. The Asia-Pacific Trade Agreement (APTA), the oldest preferential trade agreement in the region, may be further leveraged as a 'bridge' mechanism to maintain duty-free access with major neighbors like China and India post-graduation. Membership accession to RCEP may also be prioritized, all in support of shifting from 'Unilateral Reliance' to 'Reciprocal Regionalism.' Bilateral, reciprocal yet asymmetric, FTAs can play a role in preserving market access while scaling up support to enhance LDCs capacity.   TINA and Legal TINA are readily available tools to support negotiation. 

South-South trade partnerships on a global scale can also unlock new trade opportunities. South-South trade is growing faster and supports export diversification and upgrading. Inter-regional partnerships such as the Global System of Trade Preferences among Developing Countries (GSTP) can help connect different markets of the South, creating new trade opportunities.

Non-tariff barriers and extensive compliance requirements also make trade facilitation a continuing priority. Technical assistance for Rules of Origin compliance would help ensure both unilateral and reciprocal preferences can be fully utilized, encouraging harmonization of the rules across agreements and cross-agreement cumulation. Digitalization of trade procedures and paperless trade systems interoperability could be accelerated through participation and implementation of the Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific.