What the brand new trade bloc opportunity for Bangladesh

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Mixed opinions followed following the signing of the new trade bloc-the Regional Detailed Economic Partnership (RCEP) in November 15, 2020. Negotiated over a period of eight years since 2012, that is referred to as the world's major free trade agreement (FTA). Fifteen economies of the deal-Australia, China, Japan, New Zealand, South Korea, plus 10 participants of the Association of Southeast Asian Nations (Asean) that include Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam-cover about thirty percent of global gross domestic product and almost one third of the global people.  

Its geo-economic-political significance is high
As the global economy is facing unprecedented problem regarding low financial and trade performances as a result of Covid-19 pandemic, RCEP appears promising for the signatory countries. However, the trade deal is also viewed as a step towards a new world order which is certainly predicted to become dominated by Asia.

The timing of the signing of RCEP deal is of superb significance. The world happens to be ravaged by the coronavirus pandemic. Simultaneously, among the mighty countries of the environment, the USA is busy with amazing domestic political crisis since Donald Trump refuses to concede his defeat in the presidential elections held in early November this season. Ironically, the united states has failed to display any leadership both in tackling the pandemic and dealing with the associated monetary fallout.

So, RCEP is regarded as a car of strengthening China's impact in the Asia-Pacific area in the lack of the USA in similar trade discounts in your community. The Trump administration acquired earlier abandoned the Comprehensive and Progressive Arrangement for Trans-Pacific Partnership (CPTPP) in January 2017. The 12 countries of the CPTPP were-Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam, and the united states.  Six countries-Australia, Japan, Malaysia, New Zealand, Singapore and Vietnam-are prevalent in both agreements. Hence TPP is actually a balancing point over China's leadership in your community.

Though TPP is much more ambitious than RCEP as it covers issues such as environmental and labour standards, RCEP provides enormous opportunities for its members to grow more. With India's withdrawal from the pact in November 2019, China will gain influence through further benefit chain integration in the 14 RCEP markets.

Bangladesh may not face immediate challenge
The pattern of Bangladesh's exports to RCEP countries indicates that Bangladesh might not exactly worry too much at this moment for a few reasons. First, Bangladesh's exports to these countries is approximately 10 percent of total exports. Second, as a least developed region (LDC), Bangladesh enjoys numerous kinds of preferential procedures to a number of RCEP countries including Australia, China, Japan, New Zealand, South Korea and Thailand. Within RCEP location, Bangladesh's exports to these countries happen to be a lot more than 80 percent.

Third, realisation of advantages from such multi-region trade deals takes time. In fact, elimination of 90 percent tariffs in RCEP economies will need two decades from the time it comes into force. Most of all, the agreement needs to be permitted by at least six Asean countries and three non-Asean spouse countries. However, specialists say it could take the complete of 2021 to total this process. 

But Bangladesh's stress is coming
Three LDCs such as for example Cambodia, Laos and Myanmar will be members of the new pact. Among them, both Laos and Myanmar have received eligibility to graduate from the LDC category in 2018 along with Bangladesh. By being part of the new trade bloc, these LDCs will continue steadily to enjoy preferential industry access actually after their graduation. Even so, once Bangladesh graduates in 2024 and finishes the three-season grace period after graduation in 2027, it will lose preferential treatment in RCEP market segments which are now providing such center to Bangladesh.

So, at present import restrictions might benefit some domestic firms, but in the long term Bangladeshi exports will suffer.

Bangladesh's biggest worry can be how to contend with Vietnam. Despite some challenges, Bangladesh has had the opportunity to keep its location in the global marketplace regarding readymade garments (RMG) exports. Though Bangladesh gets duty no cost quota free (DFQF) marketplace access in the EU marketplace, this will cease after 2027. However, Vietnam has signed bilateral FTA with europe (EU) that will guarantee its preferential industry access because of its exports to the EU market segments. Vietnam is also an associate of the US-led TPP which happens to be stalled. As the united states sees a regime switch, the revival of TPP arrangement by the president-elect Joe Biden is normally a possibility. Right now with the membership in RCEP as well, Vietnam will set Bangladesh right into a disadvantageous position.

Bangladesh will come to be challenged by the new trade bloc found in other ways also. These kinds of mega trade offers aren't confined within trade simply. It creates opportunities for investment and strengthening source chains. RCEP countries may also like a liberal "guideline of origin". To place simply, rules of origin will be the standards which determine the share of local content material of product to reap the benefits of lower tariff when exported overseas. RCEP participants can avail the preferential tariffs on items on a more flexible guidelines of origin. This will also attract purchase among the member countries and rise exports to its participants under preferential trade plans. To them, Bangladesh or different non-RCEP countries will not be attractive investment destinations.

Preparing for the new reality
Because the Doha Round trade negotiations of the World Trade Organisation is still mired in stalemate, countries have fallen back on FTAs and regional trade agreements (RTA). Bangladesh's damage due to RCEP and additional RTAs can be mitigated somewhat through energetic participation in the FTAs. Bangladesh as a member of several FTAs like the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), can effectively utilise these platforms to benefit more from regional trade integration.

The apprehension of losing the export market segments to competing countries through RCEP has resulted in the theory that Bangladesh should join the pact, if approached by RCEP members and even proactively. This will demand expansion of Bangladesh's negotiating capability to handle the complex character of these agreements. This should also become complemented with a comprehensive assessment of the implications of the arrangement on investment and earnings earned through duties.

This is because firstly, RCEP is a reciprocal agreement. This means in exchange of getting preferential market gain access to into RCEP countries, Bangladesh may also have to supply the same to all or any RCEP people. This is simply not the circumstance with the EU. The EU delivers non-reciprocal DFQF marketplace access. Therefore, the results on the domestic marketplace will have to be properly evaluated before getting into such deals.

Second, profiting from such deals additionally require a whole lot of groundwork. Such offers set high specifications for trade and purchase. The deal also contains provisions on intellectual property rights, e-commerce, telecommunications, and financial and professional services. Bangladesh must undertake major regulatory and financial reforms to meet those stringent requirements. The productivity level should be better to compete in a tougher trade regime. Such preparation may also help Bangladesh's smooth and sustainable graduation.

Source: https://www.thedailystar.net

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