Stumbling blocks to FTA

Bangladesh is currently enjoying trade-related facilities from European Union (EU) under the category styled ‘Everything but Arms’ (EBA). There are three types of categories - Everything but Arms, GSP + and Standard GSP. Under Generalized System of Preferences (GSP) launched by the World Trade Organization (WTO), the economies get GSP facilities based on fulfilling criteria and status. Since the status of Bangladesh is going be changed as a developing country in 2026, the long-running EBA facility would automatically be withdrawn from EU markets. Bangladesh has been enjoying Duty Free Quota Free access (DFQF) to EU markets since long. But, Bangladesh would no more be allowed Duty free Quota free access to 38 countries following LDC graduation. As a result of losing the opportunities, Bangladesh is set to face stiff competition in EU markers with other exporting countries that have trade agreements them.

Right now, ‘Free Trade Area (FTA)’ is the best way to overcome expected trade-related challenges. The world’s most powerful economies have FTA deal with many countries. The countries, having strength economic stability, had been struggling to ink FTA deals till now. In absence of trade-friendly connections, many economies have gone faced falling growth trend. Mention should be made here that a few countries have so far gained ability to keep pace with developed economies economically by dint of having FTA treaty. Bangladesh, now known as one of the fastest growing economy in the world, is on the move for arranging talks regarding FTA affairs. Despite giving untiring efforts to ink FTA deal, Bangladesh is to get to the final stage of the talks.

If it sees failure in reaching final stage in respect of FTA issue, Bangladesh might suffer a lot. The suffering is likely to start soon after LDC graduation era. Bangladesh is yet to resolve labor-related issues set by the European Union and the United States. Following the Rana Plaza collapse, the US was obliged to lift GSP facilities enjoyed by Bangladesh. The US is one of the largest export destinations of Bangladesh. Bangladesh exported goods to the USA worth $6.7 billion in 2019, up by 9.5 per cent compared to 2018. On the other hand, the US exported goods worth $2.3 billion to Bangladesh in 2019, up by 12.4 from the previous year. Besides, there is no possibility of restoring the pact titled “Trade and Investment Cooperation Forum Agreement (TICFA)” signed between US and Bangladesh aiming to gear up trading. From Bangladesh side, formal proposal for restoring GSP and TICFA facilities is being put in place but US is seen unmoved.

Truly speaking, negotiations and study works are underway regarding FTA deal but no significant development is being observed. In 2020, Preferential Trade Agreement (PTA) deal was signed between Bangladesh and Bhutan but the deal remains ineffective till now. Asia Regional Integration Center (ARIC) sources said that the number three FTA deals, out of the signed five, have so far gone in operation. That the deals are functioning are Asia-Pacific Trade Agreement, Preferential Tariff Agreement-Group of Eight Developing Countries, South Asia Free Trade Area ( SAFTA). Another deal that was signed in 2014 titled ‘Trade Preferential System of the organization of the Islamic Conference’ remains inoperative. Bangladesh’s performance in playing FTA-related role is not better than its peer economies. According to ARIC, Bangladesh launched negotiations and study works on 9 FTAs. But, final stage for going signing is uncertain. Bangladesh is in negotiation stage with China, India , Sri Lanka, Turkey, Brazil, Thailand, Malaysia, Pakistan regarding FTA issue. Besides, Bangladesh began talking to the authority attached with the Bay of Bengal Initiative for Multi-Scrotal Technical and Economic Cooperation ( BIMSTEC) for executing FTA pact.

Bangladesh lags far behind in terms of FTA affairs compared to its peer economies. In this moment, Vietnam is trading with 15 economies under FTA where Cambodia with 9 countries, Indonesia with 17 countries. The mention should be made here that India has FTA with 15 countries, Pakistan with 10 courtiers, Malaysia with 19 countries, Japan with 20 countries, China with 22 countries, Singapore with 28 countries.In view of other economies’ FTA- related development, Bangladesh is trying to show dynamism for performing better than its peer economies. According the newspaper report Vietnam, Thailand, Morocco, Malaysia, USA, Japan, Canada, Senegal, Nigeria, Kenya, South Korea, India, KSA, South Africa, Mexico and Egypt, and three regional blocs Gulf Cooperation Council, Eurasian Economic Commission and MERCOSUR are the other countries or regions under examination for trade negotiations on FTA or PTA. It is worth mentioning here that works on framing ‘Policy Guidelines for Preferential Trade Agreement (PTA)/Free Trade Area (FTA)-2020’ is underway. The 2010 FTA-related policy guidelines are failing to address required demand placed by opposite numbers.

Some precautionary measures have to be undertaken prior to moving for FTA negotiations. The need for choice the countries having trade surplus instead of trade deficit with Bangladesh is a must. Time to time consultation is needed with the National Board of Revenue ( NBR), the country’s apex body for generating revenue. If the state is deprived of huge revenue for FTA deal, the tax policy needs to change depending on circumstances. According to media reports, India’s exports to Bangladesh in FY 2018-19 were $9.21 billion and imports during the period were $1.04 billion. In FY 2018, export from Bangladesh to Malaysia was $232.42 million and import to Bangladesh $1.41 billion. China, the world’s second largest economy, is no exception in this regard. So, Bangladesh economy-friendly policy guidelines are expected as soon as possible with a view to balancing all sides. Trade agreements should be executed with major export countries and zones only. If trade agreement is signed between Bangladesh and the European Union or the Association of Southeast Asian Nations (ASEAN), Bangladesh will be benefited much, no doubt. Bangladesh already lost the great opportunity for missing agreement titled “the Regional Comprehensive Economic Partnership (RCEP)”, the world’s largest free trade area. Vietnam and Cambodia grabbed the opportunity by enter into RCEP. Trading, under RCEP where around 16 economies joined, would be done with reduced tariff rate. When the economies belonging to RCEP go into operation, Bangladesh may never win the game against peer economies. So, it is essential to think about duty and tariff-related problems taking place in future. Considering expected challenges, there is no alternative ways but to execute FTA deals for the economy to survive. The sooner, the better.

The writer is an economic affairs analyst.