FTA in post-graduation Bangladesh

http://today.thefinancialexpress.com.bd/views-reviews/fta-in-post-graduation-bangladesh1547823437

FTA in post-graduation Bangladesh M S Siddiqui | January 19, 2019 00:00:00

Bangladesh signed few regional and sub -regional trade agreements (RTAs), but no bilateral free trade agreement. The regional agreements include Preferential Trade Agreements (PTA) namely: Asia -Pacific Trade Agreement (APTA), Trade Preferential System among OIC Countries (TPS -OIC), Preferential Trade Agreement among D -8 Member States (D-8), Agreement on SAARC Preferential Trading arrangement (SAPTA). It has also signed Free two Trade Agreements (FTA)-- South Asian Free Trade Area (SAFTA) and (ii) Bay of Bengal Initiative for Multi -sectoral Technical and Economic Cooperation (BIMSTEC-EC). Among the FTAs mentioned above, SAFTA is fully operational while the BIMSTEC is yet to be.

The Asia-Pacific Trade Agreement (APTA), previously named the Bangkok Agreement, was signed in 1975 as an initiative of ESCAP. Bangladesh, China, India, Lao PDR, Mongolia, Republic of Korea, and Sri Lanka are the parties to the APTA. ESCAP functions as the secretariat for the Agreement.

APTA is a preferential tariff arrangement that aims at promoting intra regional trade through exchange of mutually agreed conce ssions by member countries.

The following three Framework Agreements under APTA have been signed and ratified by the member states: (i) Agreement on Trade facilitation, (ii) Agreement on investment and (iii) Agreement on Liberalisation of Trade in Services. Successful implementation of the latter agreement can play a vital role in investment flows, not only from non -member countries but also among the member countries.

APTA was signed with the aim to promote intra -regional trade through an exchange of mutually-agreed concessions. Its membership is open to developing countries that belong to ESCAP. The entry of China in 2001 made APTA the only RTA linking the two fastest -growing economies of the world -China and India.

Bangladesh is enjoying some benefits fro m APTA due to the favourable rules of origin: (1) In case of single country content, value addition requirement is

35 per cent for LDCs and 45 per cent for non -LDCs, and (2) In case of regional accumulation, local content requirement in 50 per cent for LDC s and 60 per cent for non-LDCs. Bangladesh is mainly importing products, including intermediate goods, basic raw materials, capital goods and machinery, and industrial parts. Bangladesh for the first time offered the duty benefit on import of 602 products from five countries under APTA. India will provide tariff concession on 3,142 products to the APTA member states including Bangladesh. Also, China in general slashed duty on 2,191 products, South Korea on 2,797, Sri Lanka on 598 and Laos on 999 products.

Besides, India waived tariff on 48 products, China on 181 products, and Sri Lanka on 75 products for both Bangladesh and Laos. Meanwhile, South Korea has cut duty up to 100 per cent on 951 products for Bangladesh.

Bangladesh is now requesting China for more duty-free and quota-free (DFQF) market excess of more products and decided to avail such a facility in lieu of the benefits it enjoys in the Chinese market under APTA. This is because of the likely graduatation to the developing country status by 2024.

The present preferential facilities can be enjoyed by Bangladesh for five more years only. So, it remains a question whether dropping the facilities now is a wise choice or not.

China and India constitute for around 50 per cent of annual import of Bangladesh. Bangladesh's import from APTA countries is about 20 billion and export to APTA is very low. Out of its total US$ 51.50 billion import, Bangladesh brought goods worth around $ 16 billion from China and Hong Kong and $ 9.0 billion from India in last fiscal year 2017-18.

In 2018, export to India is US$870m and export earnings from China are US$$695m. Our major export destinations are EU, USA, Canada, Japan etc.

China and India are the source of major raw materials for our exportable items including garments. We need support from APTA to develop our export competitiveness in the APTA region. The competitiveness of export products can be ensured by elimination of customs duty on imported raw materials from China and India and also customs duty on Bangladesh exp ort to China and India.

Bangladesh can increase export with no import duty on Bangladeshi products through FTA in these two markets. Bangladesh may hope to get rid of different trade barriers in Indian market by signing FTA. Unfortunately, signing of the much needed free trade agreements (FTAs) with important trading partners is still far away as the government fears substantial revenue loss.

Bangladesh will have to be ready and continue talks with major trading partners for the FTAs as the DFQF market will no longer be available after graduation. The United Nations Conference on Trade and Development estimated that exports may fall by 5.5 per cent to 7.5 per cent after the graduation. The country should not only try to sign FTAs, but also interact with major countries and trade blocs for signing Comprehensive Economic Partnership Agreement which include trade, tourism and investment.

M S Siddiqui is a legal Economist. mssiddiqui2035@gmail.com