Home ›› 14 Jun 2022 ›› Opinion
The cold war between the world’s two largest economic powerhouses – the USA and China– is open knowledge. As part of the cold war, the economic battle between the rivals has become a common scenario—the US president, whenever coming to power, sets targets to subdue China in any affairs. On the contrary, the Chinese President slowly makes his manoeuvres to win the game. Ultimately, the results of aggressive attitudes shown towards each other bring nothing but damage to brand image. The US and China, known as the world’s first and second-largest economies, are being observed to form separate economic blocs.
The objectives of launching economic blocs are many. The United States of America ultimately gave attention to the Indo-Pacific region by forming Quad also known as ‘Quadrilateral Security Dialogue (QSD)’. The Quad members are USA, India, Australia, and Japan. The purpose of the Quad is to work for a free, open, prosperous, and inclusive Indo-Pacific region. Ultimately, the Quad members aim to downgrade China’s regional influence. In May, 2022 the Quad members met at the summit held in Japan. The Quad leaders of the four big economies announced to extend more than $ 50 billion of assistance to the Indo-Pacific region over the next five years to bridge the infrastructure gaps. The milestone step was mainly taken as a counter to China’s Belt and Road Initiative ( BRI).
Joe Biden in Tokyo recently formed an economic bloc titled Indo-Pacific Economic Framework (IPEF) ahead of the Quad Summit. There are many reasons behind launching this alliance: Australia, Brunei, India, Indonesia, Japan, South Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand and Vietnam joined the US. It has been learnt that the framework will focus on four key pillars to establish strong commitments that will deepen economic engagement in the Indo-Pacific region. The framework is expected to ensure fair economy, clean economy, resilient economy, and connected economy among the countries in the region. The emergence of the IPEF is meant to strengthen economic partnership among participating countries to enhance resilience, sustainability, inclusiveness, economic growth, fairness, and competitiveness in the Indo-Pacific region.
It is important to note that IPEF is not a type of free trade or preferential trade area. Instead, IPEF’s goal is to impose tariffs on member states while trading among them. IPEF comes as a deterrent to the people who are involved with money laundering. It is an admirable step in that direction. On the contrary, the China-led Regional Comprehensive Economic Partnership (RCEP) was formed as the world’s largest free trade area deal. Business communities from large to small scale living in RCEP member states benefit from free trade areas like RCEP. The RCEP deal, signed in November, 2020, comprises 10 ASEAN members along with China, Japan, South Korea, Australia, and New Zealand. The RCEP controls about 30 per cent of the global GDP.
On the other hand, the countries belonging to IPEF account for about 40 per cent of the global GDP. In terms of GDP share in the global context, IPEF is ahead of RCEP, which was launched earlier. Beyond improving doing business, the IPEF member states are expected to experience a resilient economy.
Bangladesh, the world’s 36th largest economy, is going forward steadily economically. With around 6.6 per cent average GDP growth over the last 13 years, Bangladesh’s economy has been moving at a fast clip. Unfortunately, a South Asian nation, Bangladesh is not a member of RCEP. Whereas Vietnam, known as a competitor of Bangladesh, is now enjoying trade facilities as an RCEP member state. As a fast-growing economy like Vietnam, Bangladesh had better join RCEP. Bangladesh has the potential to gain massively from the RCEP bloc if it can join the forum. According to a CNBC report, China will earn around $100 billion, Japan $46 billion, South Korea $23 billion, and the ASEAN bloc $19 billion from this bloc.
It is a piece of good news that US president Joe Biden looks forward to expecting Bangladesh as an IPEF member. In view of White House green signal, Bangladesh’s foreign minister is in indecision regarding joining IPEF. Dhaka remains hesitant on this issue because of IPEF being a US-led economic bloc.
If China’s economic contribution to the country is recalled, it is natural for Bangladesh to be hesitant about joining the US-led IPEF. Currently, China is the biggest trading partner of Bangladesh. For the last one decade, China has made significant contribution to the economy regarding investment. A daily reported that in FY2019, China was Bangladesh’s largest source of FDI. In 2021, the Chinese net FDI in Bangladesh was recorded at $ 558 billion. Besides, China gave duty-free facilities to Bangladesh on 8,256 products. China’s support in terms of providing zero-tariff treatment in Chinese markets was a blessing for Bangladesh. Sadly, Bangladesh is still yet to reap benefit from Chinese markets through duty-free facilities for 8,256 products.
Dhaka and Washington came forward to develop business relations by signing the Trade and Investment Cooperation Framework Agreement (CFA). CFA was signed based on three crucial features-labour condition, compliance, and Intellectual Property Rights (IPR) issues. Because it failed to show proper compliance, Bangladesh could not get the desired economic benefits from CFA. There has been no eye-catching development regarding the TICFA issue–nothing but discussions between the two nations. But, US investment in Bangladesh is praiseworthy.
Bangladesh has gained the eligibility to become a developing country. Now the challenge is to establish a fair economy. Many experts believe that if Bangladesh could join APEF, the country would experience a fair economy. Be that as it may, Bangladesh now needs a huge volume of FDI in fulfilling economic goals set by the government. With a view to establishing a strong economic foundations , Bangladesh now needs FDI which should be close to 3 to 4 per cent of GDP. Bangladesh better join economic blocs for bring FDI in a bigger way. Unfortunately, due to the economic Cold War between China and the US for a prolonged period, Bangladesh is in a dilemma in respect of joining the economic blocs- RCEP and IPEF.
The writer is an economic affairs analyst. He can be contacted
at: mazadul1985@gmail.com
