Home ›› 11 Dec 2022 ›› Opinion
Bangladesh needs to rethink the way it is doing business with the foreign nations. True, Bangladesh is performing well in exporting products under the duty-free facility. However, Bangladesh’s access to free trade areas is under question.
Despite multiple efforts, the country is yet to finalize Free Trade Agreement (FTA) with any country. Though Bangladesh has signed Preferential Trade Agreement (PTA) with Bhutan seeking duty-free access, it is known that PTA with Bhutan seldom brings trade benefits for Bangladesh. In 2013, Bangladesh and US signed the Trade and Investment Cooperation Forum Agreement (TICFA) on the condition of duty-free access. The objective of signing TICFA was to increase bilateral trade and investment between the two nations. Poor workplace safety and much-discussed labour rights issues in Bangladesh obliged the US to scrap TICFA overnight. The US is the second largest export destination next to the European Union block, where Bangladesh-made apparel products have huge demand.
Ever since the beginning of the trade relation between the European Union (EU) and Bangladesh in 1973, there has always been adequate support from the EU for Bangladesh. There are 27 countries in the EU block where Bangladesh exports goods and services. The EU allowed Bangladesh to enjoy duty-free trade benefits under the programme titled ‘Everything but Arms’ (EBA). Bangladesh is still exporting made-in-Bangladesh products in EU markets under EBA. However, the EBA programme for Bangladesh will cease to be operational after 2026, owing to Bangladesh’s graduation as a developing nation from its current Least-developed country (LDC) status. Though a matter to celebrate, the LDC graduation will cost Bangladesh many things. For example, Bangladesh’s exports to EU markets will shrink following the withdrawal of the EBA facility.
The negotiation to hold up the existing EBA facility from the Bangladesh side is already underway. As per World Trade Organization (WTO) rules, the EBA facility shall automatically be cancelled when Bangladesh steps into the developing nation category. Bangladesh is sincerely trying to be allowed for GSP plus facility. But it is difficult to gloss over the apparent stringency of the EU in respect of allowing the GSP plus scheme for Bangladesh due to labour rights issues. The EU will also oversee the development of human rights, good governance and environmental protection issues before granting GSP plus scheme. Moreover, Bangladesh must comply with 32 conventions to obtain GSP plus facility. Bangladesh is following the EU’s instructions in this regard.
Bangladesh and the EU need to improve the present relations for their more significant interest. Multiple complexities can be solved through dialogue. Bangladesh and EU, in the meantime, agreed to come out of traditional trade cooperation. During 4th diplomatic consultations held in Brussels, Bangladesh and the EU came up with the same opinion to turn conventional cooperation into a different one. In the same venue, the issue on political dialogue was raised bilaterally. As part of the talks in Brussels, the first ever ‘political dialogue’ was held recently in Dhaka in the presence of EU ambassador to Bangladesh Charles Whiteley.
The first dialogue was impressive; where the issue related to ‘Partnership and Cooperation Agreement’ (PCA) was put in place with utmost priority. The PCA is a legally binding agreement between the EU and third countries. Under PCA, the EU works to support the democratic and economic development of a country. Already, the major ASEAN economies have been brought under PCA. PCA helps to elevate relations to a great extent between the two nations. Unfortunately, the EU side did not agree to sign Partnership and Cooperation Agreement in the first political dialogue. Ahead of signing PCA, extensive dialogue required the EU side opined in the meeting.
The objective of initiating much-expected political dialogue is to provide strategic guidance and intensify foreign and security policy cooperation.
In the dialogue, Bangladesh placed timely proposals before EU representatives following LDC graduation challenges related to duty benefits. On the contrary, the EU emphasized advancing the talks in the affairs of the ‘Partnership and Cooperation Agreement’ scheduled to be signed soon. The EU side responded to Bangladesh positively. Bangladesh’s request would be considered regarding duty benefits based on the comprehensive implementation of the National Action Plan for labour. Bangladesh has to ensure labour rights and workplace safety in getting the next course of trade preference named ‘GSP plus’. Besides that, the wide-ranging discussion focused on shared values of democracy, fundamental freedoms, the rule of law, inclusiveness and respect for human rights. In particular, the dialogue came up with many vital issues intending to broaden Bangladesh-EU engagement.
The dialogue ensured working beyond the current priority areas of trade, migration, governance, humanitarian action and development cooperation. The emphasis on climate action, digital transformation, connectivity and security has been given.
The political dialogue between Bangladesh and EU showed good signs of bilateral relations, no doubt. But, the dialogue might have raised FTA issue which is crucial considering future need of economy. Vietnam has FTA deal with the EU block. A newspaper reported that EU’s tariff on apparel imports from Vietnam would be cut to zero per cent in seven years.
During the period, Bangladesh has to face up to 12 per cent tariff from zero per cent (In the absence of GSP facility). Is it possible for Bangladesh to stay competitive in the apparel sector during post-LDC era because of Vietnam scenario? European Union (EU) envoy in Bangladesh Charles Whiteley, in a programme titled “Strengthening Bangladesh-EU Trade and Economic Cooperation: Issues and Policy Priorities”, gave nod regarding FTA signing. In line with EU envoy commitment, Bangladesh should carry out its tasks for signing FTA with the EU.
Bangladesh’s export to the EU block is traditionally significant due to duty benefits. A study finding in the above-stated program revealed that Bangladesh’s combined exports to the EU and the UK expanded rapidly from $ 2.5 billion in 2000-01 to $ 25 billion in 2021-22. The achievement has been possible by getting a duty facility under the “Everything but Arms” scheme. It is essential to note that between 2017 and 2021, the net FDI from EU countries stood at $ 3.5 billion.
It has been reported that the EU included Bangladesh in its “Talent Partnership” programme. The programme helps to prevent irregular migration. The repatriation of irregular Bangladeshi migrants would take place under the newly launched programme. The EU now demands legal migration. Considering the forex reserve situation in Bangladesh, the EU should show a relaxed attitude on migration, among others. It is good news that the EU looks forward to enacting ‘Partnership and Cooperation Agreement’ (PCA) because of Bangladesh’s economic growth and socio-economic development. The second political dialogue will ensure that the GSP plus scheme for Bangladesh take bilateral relations to a new height.
The writer is economic affairs analyst. He can be contacted at [email protected]
