Bangladesh going all out on new FTAs; experts advise caution

by Apparel Resources

27-December-2018  |  7 mins read

Bangladesh’s days as a least developed nation (LDC) will soon get over! As per estimates, by 2024 the country will join the league of developing nations, following which it would cease to be a beneficiary of various benefits it enjoys as an LDC, including tax benefits on exports.

Considered the lifeline of the country’s economy, growth and development, graduating to a developing nation is expected to have serious implications for the country’s readymade garment sector as it would no longer be eligible for trade benefits in many of its export destinations.

“Yes, we will lose the privileges that we enjoy as an LDC on graduation but there is still long way for that to happen. Currently we are discussing and deliberating on the way forward including even the Government as it needs to play a crucial role in the whole process,” underlined BGMEA President  Md. Siddiqur Rahman while speaking to Apparel Resources.

Keeping in mind the industry’s concern, the Government has now reportedly shifted its focus on building trade relations with existing and new partners revolving around FTAs. As per reports, the Ministry of Finance has recently given a go ahead to the Ministry of Commerce to move forward towards signing bilateral and multilateral free trade area (FTA) agreements with developed and developing countries. A decision to this end followed a recent meeting at the Prime Minister’s Office (PMO) wherein it has been decided to direct the relevant ministries and divisions to take steps for signing FTAs after conducting feasibility studies.

Md. Siddiqur Rahman, President, Bangladesh Garments Manufacturers and Exporters’ Association (BGMEA)

“Bangladesh’s large trade gap with many countries can be minimised through signing FTAs since it will help raise goods exports,” a note issued by the Finance Ministry to the Commerce Ministry maintained.

The Government has indentified China, India, Indonesia, Brazil, Malaysia, Thailand, South Korea, Pakistan, Japan, Argentina, United Arab Emirates, Australia, Sri Lanka, and Saudi Arabia as the potential countries for signing of FTAs.

“The (preferential trade agreements) will also help Bangladesh to continue getting the duty benefits after its graduation from the league of least developed countries (LDCs),” observed Commerce Minister Tofail Ahmed earlier speaking to media while underlining that the Government was looking for ways to sign preferential trade agreements with the trading partners, which according to the minister are vital for Bangladesh to remain competitive in the international arena.

Bangladesh has reportedly made significant progress in signing FTA deals with Sri Lanka and China already. Even a feasibility study by Bangladesh Tariff Commission has found that signing free trade agreement (FTA) with Sri Lanka would be beneficial for Dhaka but if reports are to believed Sri Lanka is not yet keen on opening FTA negotiations with Bangladesh till it’s able to clinch the ongoing FTA negotiations with China and Korea.

As far as China is concerned, in June last, Bangladesh started conducting a joint feasibility study on the possibility of inking an FTA deal with China. Even the trade officials of the two countries have also finalised the terms of references (ToR) and structure of report of the study.

Bangladesh has been playing a waiting game in the recent past as some trade officials had reservations about signing the FTA deal with any country before Bangladesh graduates to the developing nation. However, this obstacle was also removed recently when the Commerce Ministry convened a workshop to get opinions from major stakeholders and experts, where the majority of the participants spoke in favour of signing FTAs with potential export markets.

Bilateral FTAs becoming instrumental in the global trading system as the prospects of multilateral trading systems under the World Trade Organization are decaying gradually havefurther led Bangladesh to focus on the same more so when many of its competitors have signed FTAs with trading partners thereby giving them an edge over Bangladesh.

Notwithstanding the benefits of such agreements, experts feel it is advisable to move cautiously! Speaking to media, Dr Debapriya Bhattacharya, the distinguished Fellow of Centre for Policy Dialogue (CPD) maintained that there is no problem in exploring FTA possibility with major countries but during the study, some issues have to be kept in consideration so that Bangladesh can benefit from the deals.

As per Bhattacharya, Bangladesh needs to check whether it will get preferential tariff reduction and products having export potential can be included in the FTA concession list. “The amount of revenue loss from FTAs needs to be calculated and removing non-tariff barriers has to be addressed,” underlined Dr Bhattacharya.

Bhattacharya’s view on the same has also been shared by Tofail Ahmed, who reportedly stated that signing of FTAs with some countries is being delayed because every country looks after its own interests, and a case in point has been that of Turkey.

“We are even interested to sign an FTA with Turkey. But they are also moving very slow because if there is an FTA between Turkey and Bangladesh, it comes in Bangladesh’s favour,” stated Ahmed earlier. Even in case of Malaysia, duty-free market access through the process of FTA will reportedly go in Malaysia’s favour because the trade is already tilted towards the latter.

Given the current circumstances, Bangladesh has to maintain a perfect balancing act if it is to make significant breakthroughs through FTAs.  

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