On 15 November 2020, 15 countries — members of the Association of Southeast Asian Nations (ASEAN) and five regional partners — signed the Regional Comprehensive Economic Partnership or RCEP, arguably the largest free trade agreement in history. RCEP brings together the 10 members of the ASEAN plus Australia, China, Japan, New Zealand and South Korea.
Initially, Bangladesh did not show much of an interest in joining the world’s largest trade deal, which was reportedly due to safeguarding its revenue generation from duties on imports while on the other hand, none of the would-be RCEP signatories also reportedly asked Bangladesh to join their ranks.
“We did not join the RCEP. We have not shown interest in joining the deal although we knew about it. The RCEP members did not give any proposal to us to join this mega trade deal,” reportedly maintained Additional Secretary to the Commerce Ministry, Sharifa Khan then, who reportedly presumed there would not be any major negative impact on Bangladesh’s export even if Bangladesh is not part of the deal as Asian markets are major sources for Bangladesh’s imports.
Echoing Khan’s views, Md Shafiqul Islam, who retired from the Commerce Ministry not so long ago and was in charge of the FTA wing as an Additional Secretary also reasoned Bangladesh’s disinterest in signing the deal for the plausible drastic drop in revenue generation from import duty. He reportedly maintained that India withdrew itself from the list of signatories considering the fate of its domestic industries, because there is a possibility of the invasion of Chinese goods in Indian markets.
It may be mentioned here that India decided to drop out of the RCEP’s negotiations after participating in 28 of 31 rounds of talks over a six-year period even as according to people in know of things, New Delhi’s decision owed largely to concerns that RCEP participation would expose Indian producers and manufacturers to a flood of cheap and mainly Chinese-made imports, and unequal trade flow Indian officials say would have jeopardised millions of local businesses, industries and jobs even as Indian textiles, agriculture and dairy sectors, which employ hundreds of millions of workers, were seen as the most vulnerable to Chinese and other RCEP signatory imports.
Under the pact, India would have been required to steadily drop tariff levels even as Indian trade groups and associations claimed Indian industry was already vexed by a sharp increase in imports from China that have adversely impacted small and medium-sized factories in particular while at the same time, India’s exports are often blocked by non-tariff barriers imposed by China.
However, things might not be the same with Bangladesh, as one might assume.
Meanwhile, as per Md Shafiqul Islam, Bangladesh also does not have that much of an experience in FTAs with any country till date. “So, how will it handle such a big trade deal where the interests of the domestic industries are very much involved?” asked Shafiqul then while adding, “We are very much protectionists in international trade compared with other countries. So, it was not possible to place a proposal to join the platform,” even as Commerce Secretary Md Jafar Uddin also said the Asian region, especially China, was the largest area from where Bangladesh sourced its imports — for instance, Bangladesh earns nearly Taka 25,000 crore in a year as duty on imports solely from China — so, the Government’s major earnings are generated from the duties on imports from Asian nations, he said.
Moreover, Bangladesh did not show interest in joining the deal since it has already been enjoying duty benefits to Chinese markets as both a least developed country (LDC) and also under the Asia Pacific Trade Agreement (APTA). Furthermore, the Chinese Government also offered duty-free access to 97 per cent of goods originating in Bangladesh, for which there was no need to join such a trade group.
Even as Bangladesh had not joined the RCEP then, many economists and experts maintained Bangladesh would do well to do so including the Executive Director of the Policy Research Institute Ahsan H Mansur, who then said Bangladesh should join such regional trade deals and also sign FTAs with major trading partners to enjoy preferential trade benefits after the country graduates to the ranks of developing ones from the list of the LDCs even as highlighting the RCEP’s impact on Bangladesh’s export, Mansur said since Vietnam was also a member of this mega deal, Bangladesh might face some more challenges in garment exports to global markets as Vietnam was a major competitor of Bangladeshi apparel items.
Vietnam has already signed FTAs with many countries such as China and trade blocs like the European Union, said Ahsan H Mansur even as Prof Mohammad Abdul Momen of the Institute of Business Administration of the University of Dhaka said a lower tariff for Vietnam under the RCEP would hurt Bangladesh’s garment shipments.
Many analysts even felt that the new trade bloc will hurt Bangladesh’s export competitiveness as well as investment flow while adding that the competitors will have an edge over Bangladesh in exports and FDI flow after they join the world’s biggest trade bloc led by China even as they stated the new challenges will intensify once Bangladesh graduates from the Least Developed Country bracket and becomes a developing nation.
“We will lose the duty-free access to these countries, especially Japan, China and South Korea. But our competitors Myanmar, Cambodia and Vietnam will still have the zero-duty facilities because they are members of the new bloc,” pointed out Professor Mustafizur Rahman, a distinguished fellow at the Centre for Policy Dialogue (CPD) even as estimates suggest RCEP would account for 30 per cent of the global economy and 30 per cent of the global population and it is expected to reach around 2.2 billion consumers even as Selim Raihan, the Executive Director of South Asian Network on Economic Modeling or SANEM, said Bangladesh should be worried because Vietnam, one of the biggest competitors of Bangladesh in the global clothing industry, and other ASEAN countries will get trade facilities in China, Japan and Korea.
Given the views as expressed by these experts, it was but perhaps given that at some point in time, Bangladesh might do a rethink on this issue considering all the drawbacks, the country would have to face, if it is not a part of the RCEP.
And if latest media reports are something to go by, Bangladesh has at last, decided to join the largest trade bloc, to stay eligible for duty-free trade facilities in the markets of nearly one-third of the global economies after it graduates to a developing nation in 2026 even if the Commerce Ministry was reportedly planning to send a formal proposal to the RCEP headquarters, conveying the country’s interest in availing a membership to the bloc.
With the trading alliance of 15 economies, including China and Japan, entering into force at the beginning of 2022, Bangladesh’s exports to the RCEP nations will not face much trouble until 2026 when the country’s duty-free access to these two major markets will end, according to Commerce Ministry officials, who maintained that after the LDC graduation, such facilities will no longer be available. Besides, if Bangladesh does not join the RCEP or sign free trade agreements separately with those countries by 2026, it will lose its competitive edge in apparel export destinations, especially in China and Japan, while its competitor Vietnam as an RCEP signatory will enjoy duty-free access there after the deal takes effect.
That is why, keeping in mind the possible losses of trade benefits in RCEP member countries, Bangladesh has decided to enter the trade association, reportedly maintained the concerned officials
Bangladesh though stayed aloof from the entire negotiation process in the formation of the world’s largest trade bloc but experts opined that Bangladesh might lose trade benefits and face problems in attracting foreign direct investment because of the China-led RCEP and suggested that Bangladesh should try to join or at least sign a deal with the RCEP to safeguard its economy even as within a week into the formation of the trading bloc, Bangladesh’s Commerce Ministry formed a nine-member committee to assess any possible negative impact from the RCEP on the country’s exports. It was also tasked with identifying what benefits Bangladesh would get if it joined the free trading bloc even as according to the committee, 10 ASEAN countries have already introduced duty-free trade facilities among themselves and among the remaining six signatories, China and Japan are important markets for Bangladesh as it is getting duty-free access to these countries.
Further, when the US-led 12-nation Trans-Pacific Partnership (TPP) agreement was drafted in 2015, the Commerce Ministry had sought views of Bangladesh embassies in various countries on the agreement’s possible negative impact on Bangladesh’s exports and ways to overcome it even if Tapan Kanti Ghosh, Bangladesh’s then Commercial Counsellor in Brussels, reportedly suggested joining the China-led RCEP to counter the potential impact posed by the TPP.
Now if Bangladesh goes ahead with its plans of joining the RCEP and what would be the implications of the same in the long run post LDC graduation, if the country becomes a part of the same, remains to be seen though.