Progress slow in signing preferential trade deals with trading partners

There has been little progress regarding the signing of preferential trade deals by Bangladesh with major trading partners amidst the change in government following the anti-discrimination movement in July. 
Bangladesh wants to sign the free trade agreements (FTAs), comprehensive economic partnership agreements (CEPAs) and economic partnership agreements (EPAs) to continue enjoying zero-duty benefits once it graduates from the least developed country (LDC) status to that of a developing nation in 2026.
Initiatives had been taken for signing FTAs with China, Indonesia and members of the Association of Southeast Asian Nations (Asean), a CEPA with India and an EPA with Japan.
In this regard, Bangladesh has already conducted joint studies individually with India, China and Japan.
Formal negotiations were supposed to be launched soon but the fall of the Sheikh Hasina-led government on August 5 has led to the suspension of schedules.
“A meeting with Japan was supposed to be held in August in Dhaka…but this meeting is rescheduled for November and the date is yet to be confirmed,” said a senior commerce ministry official asking not to be named.
Similarly, dates for formal talks with India and China could not be confirmed yet, the official also said.
There has been a slowdown in progress for the change in government, he added.
However, the official is hopeful that the interim government would start the negotiations soon.
Till date, Bangladesh has been able to sign only a preferential trade agreement (PTA) with Bhutan in December 2020 involving 100 goods of Bangladesh and 34 items of Bhutan.
The trade deals are necessary as higher duties will be imposed on Bangladesh after the LDC graduation.
Currently, Bangladesh as an LDC has been enjoying zero-duty benefits to 38 countries, including the 27 European Union (EU) nations.
However, after the LDC graduation, the local exporters will have to face duties on the shipment of goods and their competitiveness in global trade may wane.
However, the EU has announced plans to extend the trade facilities to the graduating LDCs for three more years to prepare for the status transition.
That means, Bangladesh will continue to enjoy the LDC trade benefits of the EU till 2029.
Moreover, Bangladesh and other LDCs have been negotiating under the World Trade Organization (WTO) for the extension of the trade benefits.
This prompted global leaders at the 13th WTO ministerial conference in Abu Dhabi to agree to extending the LDC trade benefits for three more years.
However, the countries need to undertake bilateral negotiations to enjoy the benefits.
The progress in negotiations has slowed and these should be reviewed, said Mohammad Abdur Razzaque, chairman of the Research and Policy Integration for Development (RAPID).
Primarily, the government should know whether it is prepared or not for launching the negotiation as capacity is a major factor in conducting trade deal negotiations with the trading partners, he said.
The preferential trade deals translate to tariff rationalisation as the partnering countries will always put pressure for reduction of tariffs for signing the final deals, he said.
Bangladesh should assess whether it is capable of rationalising the tariff structure as per demand of the partnering countries, said Razzaque.
Import duties are one of the major sources of revenue of the government as Bangladesh is one of the most protectionist countries with an average tariff rate of nearly 28 percent, he said.
One of the largest sources of import duty is China.
Bangladesh annually imports more than $20 billion worth of goods from China. From this, the government’s revenue department earns more than Tk 25,000 crore.
Meanwhile, after the change in government, a section of businesspeople has been urging the interim government to review whether Bangladesh truly fits the criteria for LDC graduation.
There is a lot of mismatch in export and import data among different government bodies, for which questions remain over the country’s actual economic potential, they say.