Bangladesh keen to ink FTAs with 4 major economies before graduation

Bangladesh is eager to sign Free Trade Agreements (FTAs) with at least four large economies to mitigate an economic blow as the country graduates from Least Developed to a developing one possibly by 2026 when it will lose duty-free shipment benefits to most of the Western economies.

“We want to sign FTAs with the European Union, USA, Japan and Canada,” an official of the Commerce Ministry said.

He said as a Least Developed Country, Bangladesh has received duty free, quota free trade facilities and GSP benefits that played a major role in expanding home exports. But, after Bangladesh’s economic graduation, none may offer those benefits.

“It is an emergency policy matter for a nation like Bangladesh to immediately sign free trade agreements with different countries to consolidate the export markets,” said the official who requested anonymity.

Statistics show some 18 FTAs are active in Malaysia, 14 each in Vietnam and India and 9 in the Philippines. Contrarily, Bangladesh has only three active FTAs / PTAs, i.e., the Asia-Pacific Trade Agreement (APTA), the Developing Eight (D-8) and the South Asian Free Trade Agreement (SAFTA).

“We have one of the major tasks ahead which is completing free trade agreements with major economic blocs and countries, such as, European Union, USA, Canada and Japan before the country graduates,” said Commerce secretary Tapan Kanti Ghosh.

He, however, said Bangladesh is not entitled to ship products duty free into the US market, currently.

“We will place our proposal before them but they have to show an interest to sign a free trade agreement with us,” he told Business Insider Bangladesh on Sunday.

Meanwhile, the Bangladesh Embassy in Washington in a letter recently hinted about a negative mindset of the US on signing a FTA with Bangladesh.

“The United States does not prefer free trade with any country,” the memo said. However, “USTR has already signed FTAs with 20 countries for political reasons,” it said.

The Export Promotion Bureau (EPB) data shows about 90 percent of the total exports of Bangladesh to the United States are apparels. The country’s total apparel exports to the USA were worth $4.29 billion in 2010 and it reached $5.40 billion in 2018. Bangladesh is the second largest apparel exporter to the United States after China.

According to the Commerce ministry sources, the European Union will look forward to addressing the issue of trade privileges once Bangladesh graduates from LDC status. Now it is the single largest beneficiary of the EBA trade preferential scheme among the 48 EBA beneficiaries. The EBA scheme removes tariffs and quotas for all imports of goods (except arms and ammunition), coming into the EU from least developed countries.

Some €18 billion worth of Bangladeshi products will be imported by the EU on a tax free basis, resulting in saving Bangladesh €2 billion in duties, officials said.

Bangladesh is now enjoying special preferential treatment (SPT) from Japan that is applied only to LDC. Japan has been emerging as the large export market for Bangladesh in Asia. Over the last 12 years the export figures have doubled and reached $1.2 billion. The main export items are textile, ready-made garments and leather products.

Data from EPB shows that Bangladesh’s shipment to Canada amounted to around $1 billion in fiscal 2019-20, down 25 per cent from $1.33 billion in the previous year.

Several studies recommended that Bangladesh can earn an additional $20 billion a year by exporting diversified products to its existing markets.

According to a recent study conducted by the Economic Relations Division (ERD), around $18 billion worth of export potentials remain unexplored in 10 major export destinations.

Germany, US, UK, France, Spain, Italy, Poland, Japan, Netherlands and Canada can be the major destinations from where Bangladesh can fetch an additional $18 billion a year in export earnings.

According to the ERD report, RMG, leather, pharmaceuticals, plastics, footwear and shrimp have the potential to bag another $18.34 billion in addition to the current export earnings of $31.21 billion a year.