High tariffs in the home major hurdle to FTAs
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Bangladesh will face an uphill task in convincing major trading partners and regional blocs to sign no cost trade agreements (FTAs) as a result of higher tariffs since it looks to retain duty benefits after its graduation from the LDC group, according to a good government report.
"With its sky-substantial tariff regime in accordance with its comparators, Bangladesh will experience a major hurdle in getting potential FTA suitors to arrive calling."
The General Economics Division, a wing under the planning ministry, prepared the report styled "Affect assessment and coping up strategies of graduation from LDC status for Bangladesh".
Currently, Bangladesh does not have all bilateral FTA with virtually any nation. Dhaka has been in talks with many countries for years to sign FTAs and the Comprehensive Economic Partnership Arrangement (Cepa).
In December, Bangladesh struck preferential trade agreement (PTA) with Bhutan, its primary bilateral trade agreement, since it looks to retain duty-free market access after it becomes a developing nation in 2024.
Under the manage Bhutan, Bangladesh are certain to get duty preference for 100 goods and extend the same benefit to Bhutan for 34 goods.
Bangladesh might ink PTA with Nepal soon. Besides, the government is normally in negotiation with 11 considerably more countries to sign FTAs.
Regional trading arrangements that hold huge prospect of trade and investment will be the Regional Comprehensive Economic Partnership (RCEP), the Association of Southern East Asian Countries (Asean), and the Complete and Progressive Agreement for Trans-Pacific Partnership, which in concert will constitute the majority of Asian market in the future.
Bangladesh will be well-advised to attain trading arrangements with these groupings, the statement said.
"But that could be an uphill activity given the existing high tariff regime on Bangladesh and the tremendous resistance from domestic import substitution industries to any reduced amount of protective tariffs."
As an LDC, Bangladesh has generally enjoyed tastes that are unilaterally granted by trading partners.
This may have discouraged more proactive market exploration initiatives through bilateral and regional trade deals that could have required exchange of trade concessions predicated on reciprocity.
Post-LDC, Bangladesh may need to negotiate a trading set up with the EU and the post-Brexit United Kingdom to ensure favourable usage of the markets, which take into account more than 60 % of exports from the country.
Beyond that, Bangladesh might seek even more bilateral or regional FTAs if the projected trade creation (trade growth) plays a part in growth and employment creation.
Bangladesh is a substantial beneficiary of the multilateral trading system and its particular exemption for LDCs and developing countries.
"It would be in the very best interests of Bangladesh to continue to be a good participant under this global system of compliance of trade rules even after graduation," the report said.
Of late, the multilateral trade regime has come under severe strain from the go up in economic nationalism and protectionism. Therefore, an increasing number of countries, both developed and growing, are seeking to sign FTAs on a regional or bilateral basis.
An FTA gets the probable to create usage of larger markets for Bangladesh's exports. However they have advantages and disadvantages.
On the plus aspect, an FTA can force local industries to boost competitively and rely less on federal government subsidies. The arrangements can wide open new market segments, expand the gross domestic merchandise (GDP), and invite new investments.
They also allow companies to discover new technologies and better ways of doing things. FTAs could result in a beneficial procedure for competitive liberalisation, based on the study.
A much deeper, broader and rapid liberalisation under an FTA makes a bigger result. The FTA impact will be increased if the impediments to trade taken out by the trading arrangement are large in accordance with those that continue to be untouched, the statement said.
The most fundamental factor may be the capacity of the economy to boost the source of products that the FTA has boosted demand.
Any contribution of an FTA to Bangladesh's economical development may very well be influenced heavily by the broader policy stance of the federal government, the overall flexibility of the economy and the extent to which source can respond to any new demand.
"We could focus on FTAs with the countries which may have already shown curiosity, such as for example Malaysia, China, India and Thailand," the article said.
Emerging industry economies would also come to be good candidates, aside from Organisation for Economical Co-operation and Development (OECD) member countries. "The idea to notice is that benefits from any FTA will come to be minimal if the marketplace size of the partner country is small."
In addition to export policies, a couple of different complementary policies and programmes must promote exports after graduation from the LDC group, according to the report.
They add a stable macroeconomic environment, the effectiveness of the export promoting and supporting institutions, and smooth functioning of the financial markets.
Furthermore, the standard of governance ought to be improved by promoting transparency and accountability and cutting down corruption.
"The government also needs to take effective purpose in technology diffusion and providing appropriate physical infrastructural establishments."
The report suggested developing extreme negotiation capacity as the next 10 years will be crucial for strengthening financial institutions that can help entrepreneurs seize industry opportunities emerging in a fast-changing global economy.
Bangladesh has to close the large gap that exists in trade-related capacities in the key ministries and agencies in charge of formulating and carrying out trade plans, and mainstreaming them seeing as essential components of expansion and poverty lowering national policies.
Bangladesh has serious ability constraints found in preparing and growing negotiation approaches and undertaking actual negotiations, the report said.
"That means it is absolutely critical that Bangladesh prepares for bilaterally or perhaps regionally-negotiated trade discounts to address a number of the challenges due to its LDC graduation."
It said Bangladesh needs to build and nurture inclusive monetary institutions that are effective in enforcing home rights, create a level-playing field for small and large entrepreneurs, inspire investment in innovation, adopt new systems and develop abilities for the future to achieve and sustain high economical growth.
The commerce ministry may be the lead ministry in the preparation of technical inputs for trade policy-making and negotiations.
Additional ministries and departments like the Bangladesh Trade and Tariff Commission, the National Board of Earnings, the international and labour ministries and the individual sector will need to coordinate with the commerce ministry to sign the FTAs, the report added.
Source: https://www.thedailystar.net
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