Ahsan H Mansur, Executive Director of the Policy Research Institute said, “We are now having facilities as an LDC country in China, Korea, Australia and other big markets. Vietnam will get more access to those markets as part of the trading bloc (RCEP). The country will also get a big advantage in sourcing raw materials…”
The Regional Comprehensive Economic Partnership or RCEP is said to be the world’s biggest trade bloc!
The China-backed group excluding the USA is a free trade agreement between the Asia-Pacific nations of Australia, Brunei, Cambodia, China, Indonesia, Japan, Laos, Malaysia, Myanmar, New Zealand, the Philippines, Singapore, South Korea, Thailand, and Vietnam. The 15 member countries account for about 30 per cent of the world’s population (2.2 billion people) and 30 per cent of global GDP (US $ 26.2 trillion) as of 2020, making it the biggest trade bloc in history.
Unifying the pre-existing bilateral agreements between the 10-member ASEAN and five of its major trade partners, the RCEP was signed on 15 November 2020 at a virtual ASEAN Summit hosted by Vietnam, and will take effect as soon as it has been ratified by at least six ASEAN and three non-ASEAN signatories. The trade pact, which includes a mix of high-income, middle-income and low-income countries was conceived at the 2011 ASEAN Summit in Bali, Indonesia, while its negotiations were formally launched during the 2012 ASEAN Summit in Cambodia.
According to reports, RCEP is expected to eliminate about 90 per cent of the tariffs on imports between its signatories within 20 years of coming into force, and establish common rules for e-commerce, trade and intellectual property. The unified rules of origin will help facilitate international supply chains and reduce export costs throughout the bloc.
The RCEP is also the first free trade agreement between China, Japan, and South Korea, three of the four largest economies in Asia. As per analysts, it would help stimulate the economy amid the COVID-19 pandemic, as well as ‘pull the economic centre of gravity back towards Asia’.
In an unusual ceremony, held virtually because of the COVID-19 pandemic, leaders of RCEP countries took turns standing behind their trade ministers who, one by one, signed copies of the agreement.
RCEP will soon be ratified by signatory countries and take effect, contributing to the post-COVID pandemic economic recovery, underlined the Prime Minister of Vietnam, Nguyen Xuan Phuc while adding that RCEP will account for 30 per cent of the global economy, 30 per cent of the global population and reach 2.2 billion consumers.
It may be mentioned here that Vietnam hosted the ceremony as ASEAN chair.
“For the first time, China and Japan reached a bilateral tariff reduction arrangement, achieving a historic breakthrough,” maintained a statement issued by the China’s Finance Ministry without giving any further details but adding the new bloc’s promises include eliminating some tariffs within the group, including some immediately and others over 10 years.
Bangladesh in the equation…
As per available reports, Bangladesh has not shown any interest in joining the RCEP, primarily to safeguard its revenue generation from duties on imports while on the other hand it is being said that none of the RCEP signatories have also 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 for us to join this mega trade deal,” underlined Additional Secretary to the Commerce Ministry, Sharifa Khan, who has until very recently, served as the in-charge of the Ministry’s Free Trade Agreement (FTA) wing.
As per some, there would not be any major negative impact on Bangladesh’s export even if Bangladesh is not part of the deal as many of Asian markets are major sources for Bangladesh’s imports, not exports.
According to some media reports, which cited recently-retired Additional Secretary (in charge of the FTA wing) from the Commerce Ministry, Md Shafiqul Islam, he reportedly underlined Bangladesh’s disinterest in signing the deal for the plausible drastic drop in revenue generation from import duty.
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, reportedly stated Islam further.
India was an original negotiating party to RCEP but withdrew from negotiations in late 2019. RCEP, however, provides India preferential treatment with respect to joining the agreement if it chooses to do so in the future — in particular, the agreement expressly grants India, and no other state, permission to join RCEP within the first 18 months of the agreement’s entry into force.
Meanwhile, interacting with the media, 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). Besides, recently, the Chinese Government has also offered duty-free access to 97 per cent of goods originating in Bangladesh.
RCEP edge to Vietnam vis-a-vis Bangladesh?
Apparels account for around 85 per cent of Bangladesh’s total exports but Vietnam, which over the past 20 or so years forged many trade deals to avail competitive advantages to outperform its rivals such as Bangladesh, appears to be edging out Bangladesh in recent times, which is becoming a major area of concern for the garment makers in Bangladesh.
The RCEP is expected to help reduce costs and time for businesses by allowing them to export a product anywhere within the bloc, without meeting separate requirements for each country and experts are of the opinion that the pact of the global economy’s 30 per cent will put Bangladesh against a new challenge as the country will fall into tariff barriers after moving out of the group of the least developed countries (LDC).
Conversely, Vietnam, thanks to RCEP and the other deals that it had signed so far, will enjoy duty-free benefits under various deals.
“We are now having facilities as an LDC country in China, Korea, Australia and other big markets. Vietnam will get more access to those markets as part of the trading bloc. The country will also get a big advantage in souring raw materials,” stated the Executive Director of the Policy Research Institute, Ahsan H Mansur, adding apparel export will not only face more challenges in the global market now but after the LDC transition, competition will be even more tough.
According to reports, Bangladesh currently exports goods worth US $ 1.2 billion to Japan, which is the highest amongst the RCEP signatory countries while it ships goods amounting to US $ 680 million to Australia. But, in wake of the RCEP, Vietnam’s new trade relations with the two countries could emerge as a reason of worry for Bangladesh. Further, Vietnam is also set to get an upper hand in China over Bangladesh while Bangladesh, which exports substantial volume of goods to countries like South Korea, Malaysia and Singapore, is also expected to take a hit as Vietnam will get an extra advantage in these countries, thanks to the RCEP deal.
For information, in the last two decades, Vietnam signed around 26 trade deals including the Trans-Pacific Partnership (now defunct) and, of these, 13 have come into effect, consequent to which Vietnam is enjoying duty-free facilities, alongside LDC benefits, in most countries it signed deals with while on the other hand, Bangladesh has long been working on the implementation of 13 trade agreements but could take advantages from only three, namely the South Asian Free Trade Area (SAFTA), Developing Eight (D-8) and the Asia-Pacific Trade Agreement (APTA).
It’s time to take stock of things!
That RCEP is the world’s biggest trade bloc is definitely going to have ramifications for countries in the days to come and Bangladesh is not oblivious of it. As per latest available reports, the Ministry of Commerce has recently formed a committee – the nine-member body includes officials from the Ministry, the Bangladesh Trade and Tariff Commission (BTTC), the Export Promotion Bureau (EPB) and the Bangladesh Foreign Trade Institute, with Additional Secretary of the Ministry (FTA) Md Shahidul Islam as the convener – to review the impact of the Regional Comprehensive Economic Partnership.
Based on the recommendations of this committee, the Ministry of Commerce will decide whether to join the RCEP. The committee is scheduled to hold its first meeting in the second week of December and formally begin work.
It would reportedly analyse the impact of the agreement with ASEAN and the RCEP by preparing and presenting a report on Bangladesh’s involvement and impact with regional trade agreements.
In addition, it will also formulate a proposal to enhance the capacity of the Ministry of Commerce to sign bilateral and regional trade agreements.
Meanwhile, 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 and suggested that Bangladesh should consider signing bilateral trade deals with major trading partners soon.
There’s no denying Bangladesh has done very well to form a body to evaluate and asses the implications of RCEP (the world’s biggest trade bloc) on its exports and economy and in the days to come, one could only expect the country to chalk out a future course of action which is in the best interest of Bangladesh.
