The draft 7th five-year plan focuses on signing bilateral free-trade area (FTA) and preferential trade area (PTA) agreements with India and China respectively to raise exports as Bangladeshi products could make negligible access to the two vast economies. Also priority has been attached to market diversification through exploring some emerging potential markets to lessen dependence on two-the European Union (EU) and the United States (US). “An FTA with India and a selective cooperation in the form of a PTA/general trade cooperation agreement with China would be the preferred solutions to facilitate export to these countries,” the draft of the national development plan reads. It says India and China are both important trading partners for Bangladesh, particularly for imports. “…Bangladesh remains a minor trading partner to these two economic giants, taking up very minimal shares in their exports and imports. But exporting to India and China still remains difficult due to restrictive RoO and manifold NTBs.” In fiscal year 2013-14, Bangladesh’s exports to India fetched US$456 million while imports from that country cost $6.035 billion. On the other hand, in the same fiscal year Bangladesh’s exports to China amounted to $746.20 million and imports were worth some $7.544 billion. India has granted duty-free access of 25 but all products of least developed countries (LDCs) to its market. Bangladesh being an LDC also enjoys the benefit. As an LDC Bangladesh’s 4,788 products have entered the Chinese market without paying duty since July 2010. The draft notes that despite being located between the world’s fastest-growing and potentially largest economies, Bangladesh’s shares of export to China, India and ASEAN (Association of Southeast Asian Nations) are only 0.8 per cent, 1.9 per cent, and 1.5 per cent respectively. It suggests market diversification as the key option for Bangladesh to cut dependence on the traditional two regions-the EU and the US which together account for about two-thirds of Bangladesh’s total exports. “Achieving access to the non-traditional markets such as the BRICS countries, Japan, S Korea, and Turkey would be the big alternative destinations of Bangladeshi RMG products in the future as the domestic consumption of those countries is quite large and expanding,” the draft noted. When contacted, former president of the Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) Mir Nasir Hossain told the FE the World Trade Organisation (WTO) has taken a path of tariff reduction and someday global trade will go under non-tariff regime. Supporting the focus on signing FTA and PTA deals with India and China he said Bangladesh has to give importance on product and market diversification to raise export. Mr Hossain said the government has to be alert so that no non-tariff barriers exist after the signing of free-trade deals. “Besides, connectivity and infrastructural development have to be given importance so that goods can be channelled easily.” Replying to a query the former FBCCI chief said local industry always stays under threat from aggression of foreign products. “In that case the government will have to provide incentives to keep local products competitive.” Executive director of the Policy Research Institute of Bangladesh Ahsan H Mansur said for India and China, in the context of FTA or PTA, Bangladesh can be benefited if the FTA entails reduction of non-tariff barriers and encouragement of foreign direct investment (FDI) from these two major regional economic powers. “It is generally observed that when a country signs an FTA with other bigger powers (as Vietnam and Mexico did with the USA), it tends to increase FDI from the bigger economic partners,” he told the FE. Indian investment in Sri Lanka increased significantly after the signing of FTA, he pointed out. The policy analyst said an FTA generally provides mutual protections and safeguards in many forms for promoting trade and investment. “For Bangladesh it would be more beneficial if we can attract investment from these countries through the FTA,” he added. Mr Mansur said investment will also lead to higher exports from Bangladesh to the partner countries, which would help reduce trade imbalance with countries like India and China. “Investors will be more tempted to come to invest in Bangladesh if the goods originating from Bangladesh can come to China and India under the FTA regime.” Mr Mansur noted that any FTA with bigger powers like China and India must have proper safeguard and revenue protection mechanisms. This is quite normal practice for large and smaller economies when they sign FTAs. “Under such interim arrangements, Bangladesh should be able to maintain reasonable levels of protection for many years. Revenue can be protected by applying supplementary duty (SD) uniformly on both domestic and foreign products and not relying on applying SD on imported products for protection purpose,” he said. In any event, he further observed, as Bangladesh will become a developing country many of the current protective practices adopted by the country would need to be dismantled in line with WTO rules and regulations. “Currently we can get away with WTO rules because of our least developed status, which we should be graduating from by 2021,” he said.
