Who Paid for the Red Sea Crisis? Bangladeshi Garment Prices in the EU and Japan
Year: 2026
Type: preprint
Abstract: From December 2023, attacks on ships in the Red Sea diverted container shipping between Asia and Europe around Africa, raising freight costs and delivery times. This paper asks who bore that cost for Bangladesh’s garment exports. Using import records from the European Union (EU), whose shipments used the Red Sea route, and from Japan, whose shipments did not, I find that over the following year the price per kilo of Bangladeshi garments arriving in the EU fell by 5.5 percent relative to those arriving in Japan (95 percent confidence interval: 2.9 to 8.0 percent), even though EU import values include the higher freight. The result holds for sea shipments alone, a later start date and a fixed exchange rate, and a placebo test shows no earlier change. Since the EU price includes freight, the price exporters received per kilo for EU orders fell by more than the extra freight cost. The pattern is consistent with exporters absorbing the cost through lower prices, while slower delivery or weaker EU demand may explain the part of the fall beyond freight.
Author: Azom, Kazi Affnann
Language: English
Topic: Global trade and economics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W7224378782