Bhutan
As a least-developed country (LDC), Bhutan is a beneficiary of the EU's "Everything but Arms" (EBA) arrangement. The World Bank considers Bhutan a lower middle-income economy with a per-capita income of $2,711 in 2022. EU imports from Bhutan amounted to about €21.1 million in 2023, and EBA preferential imports reached €7.0 million. As Bhutan graduated from LDC status in December 2023, it will no longer be an EBA beneficiary country after 31 December 2027 and will then be a beneficiary of the Standard GSP.
What is the EBA?
The EBA arrangement covers all LDCs as classified by the United Nations. This arrangement enables duty-free and quota-free access for all products originating in LDCs except for arms and ammunition. Unlike beneficiaries of the Standard GSP and GSP+, LDCs are not excluded from the scheme if they benefit from other preferential arrangements or agreements with the EU.
At a glance: EU preferential imports from EBA beneficiary countries (2023, € million)
0.8M (2023)
Population
Constitutional Monarchy
Government
5.2% (2022)
GDP Growth
4.2% (2023)
Inflation
$ 2.9B (2022)
GDP
Facts about Bhutan's economy
Landlocked Economy
Bhutan is a landlocked economy located in between the two powerful economies of China and India. Bhutan’s terrain is dominated by the Himalaya and the country controls a number of important mountain passes.
Export Products
Bhutan's most important export products are ferro-alloys, dolomite, semi-finished iron products, cement, carbides, and gypsum. The most important agricultural products for export are nutmeg and cardamom.
Trade Partners
Bhutan's trade is strongly focussing on India as a trading partner. India accounts for more than 90% of exports and imports, leaving Bhutan vulnerable to fluctuations on the Indian market.
Economic Structure
Hydropower construction is at the centre of the Bhutanese economy and is the most important source of income. The majority of Bhutan's population, however, is employed in the agricultural sector which is dominated by small scale farms with a low productivity. The main crops are rice, corn, potatoes, citrus fruits, and a number of spices. Four industries build the centre of the manufacturing sector: processed foods, wood, cement, and chemicals. The services sector, which contributes about 51% (2022) to Bhutan's GDP, is concentrated around public administration, trade, finance, and restaurants.
Carbon-negative Economy
Bhutan is the only carbon-negative economy in the world meaning it absorbs more CO2 than it emits, and the government has taken strict steps to protect the environment. Instead of taking the GDP as a baseline parameter for the country’s progress, the government has introduced the Gross Happiness Index.
Trade with the EU
Total trade with the EU summed up to €37 million in 2023. With a small share of 0.9%, the EU is the fourth most important trading partner for Bhutan - but the second largest export destination with a share of 2.0%, after India.
Bhutan and the EU
Imports from Bhutan by product section (2023, € million)
Imports from Bhutan over time (€ million)
BHUTAN AND THE EU GSP
Economic Impact
99%
Almost all of Bhutan's exports to the EU were eligible for EBA preferences in 2023.
35%
Bhutan's preference utilisation rate in 2023.
38%
Share of zero-duty imports from Bhutan.
Preference utilisation and export diversification
EU imports from Bhutan (€ million)
Preference utilisation (%) vs. total eligible imports (in € million)
Almost all of Bhutan's exports to the EU are eligible for EBA preferences; their value has been volatile over the years without a clear trend. Bhutan’s preference utilisation rate was consistently high (well above 90%) until 2022 but dropped to 35% in 2023. This is driven by the same utilisation rate by base metals (iron and steel), by far the country's largest product section under the EBA.
The largest product sections under EBA (€ million, 2023)
Preferential imports from Bhutan are highly concentrated on base metals, particularly iron and steel imports. These products accounted for about 98% of overall preferential imports. They had a preference utilisation rate of close to 100% until 2022, which however dropped to 35% in 2023. EU imports of other product groups from Bhutan are insignificant.
SUSTAINABLE DEVELOPMENT
Bhutan's preferential access to the EU market, as a beneficiary of the EU's EBA scheme, is not bound to the ratification of international conventions. Bhutan has ratified 2 out of 7 fundamental UN conventions on human rights and is a signatory to the International Convention on the Elimination of All Forms of Racial Discrimination. To date, Bhutan has not ratified any of the core ILO conventions for the protection of labour standards. Bhutan shows a strong commitment regarding environmental protection and good governance and has 11 conventions from these areas.
Core international conventions on human rights and labour standards
Ratified
- International Convention on the Elimination of All Forms of Racial Discrimination (1969)
- Convention on the Elimination of All Forms of Discrimination Against Women (1981)
- Convention on the Rights of the Child (1990)
Not Ratified
- Convention on the Prevention and Punishment of the Crime of Genocide (1948)
- International Covenant on Civil and Political Rights (1976)
- International Covenant on Economic Social and Cultural Rights (1976)
- Convention Against Torture and other Cruel, Inhuman or Degrading Treatment or Punishment (1987)
- Convention concerning Forced or Compulsory Labour, No 29 (1930)
- Convention concerning Freedom of Association and Protection of the Right to Organise, No 87 (1948)
- Convention concerning the Application of the Principles of the Right to Organise and to Bargain Collectively, No 98 (1949)
- Convention concerning Equal Remuneration of Men and Women Workers for Work of Equal Value, No 100 (1951)
- Convention concerning the Abolition of Forced Labour, No 105 (1957)
- Convention concerning Discrimination in Respect of Employment and Occupation, No 111 (1958)
- Convention concerning Minimum Age for Admission to Employment, No 138 (1973)
- Convention concerning the Prohibition and Immediate Action for the Elimination of the Worst Forms of Child Labour, No 182 (1999)
Additional Conventions
- Convention on International Trade in Endangered Species of Wild Fauna and Flora (1973)
- Montreal Protocol on Substances that Deplete the Ozone Layer (1987)
- Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal (1989)
- Convention on Biological Diversity (1992)
- The United Nations Framework Convention on Climate Change (1992)
- Cartagena Protocol on Biosafety (2000)
- Kyoto Protocol to the United Nations Framework Convention on Climate Change (1998)
- United Nations Single Convention on Narcotic Drugs (1961)
- United Nations Convention on Psychotropic Substances (1971)
- United Nations Convention against Illicit Traffic in Narcotic Drugs and Psychotropic Substances (1988)
- United Nations Convention against Corruption (2004)
EU-Bhutan Bilateral Development Cooperation
DG INTPA
Access all info about EU-Bhutan relations on the International Partnerships website.