SYFUL ISLAM and REZAUL KARIM |
July 02, 2022 08:27:57
July 02, 2022 08:32:30
Bangladesh’s exports could increase by 17% and gross domestic product (GDP) by 0.26% if a free trade agreement (FTA) is signed with member states of the emerging Regional Comprehensive Economic Partnership (RCEP) bloc.
The RCEP agreement, which entered into force in January this year, is considered a high-quality, modern and comprehensive FTA between ten member states of the Association of Southeast Asian Nations (ASEAN) and its five FTA partners.
ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam, while its FTA partners are Australia, China, Japan, New Zealand and Korea.
A remarkable feature of RCEP is that it represents the largest free trade zone in the world, accounting for around 30% of global GDP and around one-third of the world’s population.
The economic cooperation bloc covers 2.3 billion people, contributes $25.8 trillion, or around 30% of global GDP, and accounts for $12.7 trillion, or more than a quarter of global trade in goods and services, and 31% of global foreign direct investment (FDI) inflows.
A recent study by the Bangladesh Trade and Tariff Commission (BTTC) shows that Bangladesh’s bilateral trade with RCEP member countries is mainly focused on trade in goods.
In the financial year 2020-2021, Bangladesh exported goods worth $3.9 billion and imported goods worth $24.5 billion. On the other hand, at the same time, exports of services amounted to 1.8 billion dollars and imports to 2.6 billion dollars.
Bangladesh enjoys preferential access to the markets of many RCEP countries, either through Preferential Trade Agreements (PTAs) or through GSP facilities.
After graduating from least-developed country (LDC) status in 2026, duty-free access will no longer be available, except for the reciprocal general preference under the Asia-Pacific Trade Agreement (APTA).
In such a situation, maintaining the steady progress made by Bangladesh in bilateral export trade with some of the RCEP countries and seizing the opportunity for some potential RCEP destinations will be a real challenge.
The study indicates that the RCEP includes some of the major export destinations as well as major import sources of Bangladesh. Considering the bilateral trade scenario, RCEP remains more of an important partner from the perspective of Bangladesh.
Imports from RCEP account for approximately 43.92% of Bangladesh’s total global imports, 55.33% of total tax revenue and 58.56% of total revenue from customs duties collected from domestic consumption, from of the 2020-21 financial year.
Thus, Bangladesh’s likely membership of RCEP could, however, have a negative impact on revenue generation from customs duties.
Since some major import sources of Bangladesh like China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved in RCEP, there is a threat of loss of a certain amount of revenue from those countries.
More than 68 percent of total merchandise exports to RCEP fall under the apparel category. The top twenty export items to RCEP consist mainly of apparel products and these twenty products constitute 64 percent of the total export items.
The study found that the average Most Favored Nation (MFN) tariff for Bangladesh was comparatively higher than that of RCEP members.
It indicates that the likely increase in imports as well as a relatively protective Bangladesh regime estimated a likely high revenue loss for Bangladesh compared to that of RCEP.
“However, as the estimated trade creation would likely be higher than the trade diversion effect for Bangladesh, it could generate additional revenue from other fees and charges, if not reduced due to eventual RCEP membership,” the study said.
The Trade and Tariff Commission recommends that the government should express its positive position regarding Bangladesh’s RCEP membership by weighing the pros and cons.
In this case, national rules and regulations may need to be changed in some cases, if the situation arises.
Former BTTC member Dr. Mostafa Abid Khan told FE on Friday that Bangladesh needs to reform various policies that will help reduce revenue losses resulting from signing FTAs.
“Reforms of tariff policy and education sector policy are needed immediately,” he said, adding that competent human resources must be created.