Bangladesh, Bhutan finalise terms of preferential trade agreement

Published 23 Dec,2020 via The Financial Express - Bangladesh and Bhutan finalised the terms and conditions recently for signing a preferential trade agreement (PTA) to increase bilateral trade.

Under PTAs some select goods enjoy duty benefits from both countries whereas under free trade agreements (FTAs) almost all goods enjoy the same benefits. But both the countries will also lose import and export revenue.

After signing of the deal, Bangladesh will get duty-free benefit on export of 100 different goods, including garments, processed agricultural goods and electronics. On the other hand, Bangladesh agreed to provide duty benefit to 34 Bhutanese products including fruits.

In fact, the signing of the FTAs with important trading partners is still a remote possibility for Bangladesh as many countries are not that much interested to go for such deals.

The United Nations (UN) has strongly recommended that Bangladesh sign FTAs with major trading partners like China to counter a regime without duty-free access facility following the graduation to developing country status.

The government is now looking for ways and means to sign preferential trade agreements with trading partners. The preferential agreements are vital for Bangladesh to remain competitive in the international market.

Such deals will also help Bangladesh to continue getting the duty benefits after its graduation from the league of least developed countries (LDCs). Deadline was set on September 31 this year to ink an FTA with Sri Lanka. But unfortunately, Sri Lanka is moving very slowly.

Bilateral FTAs are becoming instrumental in global trading as the prospects of multilateral trading systems under the World Trade Organisation (WTO) are gradually losing their efficacy. There are more than 200 such deals worldwide. Neighbouring India has signed many FTAs including with the Association of South East Asian Nations (Asean) and is trying to sign another with the European Union (EU).

Bangladesh is interested to sign FTA with Turkey. But the Turkish authorities are also moving very slow, perhaps because of greater benefits likely to occur in favour of Bangladesh. A proposal has also been sent to Thailand for signing FTA with that country.

After holding meetings for years, Bangladesh backtracked from signing FTA with Malaysia at the final moment a few years ago. Signing of FTA with Malaysia would have gone in Bangladesh's favour, according to experts.

Bangladesh will have to be ready and continue lobbying with the major trading partners for PTAs and FTAs as erosion of preferences will affect trade significantly at the post-graduation stage.

The country should not only try to sign FTAs, but also lobby with major countries and trade blocs for signing Comprehensive Economic Partnership Agreements which include trade, tourism and investment.

The government has recently stressed the need for signing FTA with China aiming to narrow the yawning trade gap between Bangladesh and China. In 2015-16 fiscal, Bangladesh exported goods worth US$0.81 billion to China while imported about US$10 billion worth of goods. Recently, Bangladesh has increased its exports to China, and if the growth continues, export to China is expected to reach US$2 billion within 2-3 years.

There is no denying that the country's future trade benefits will largely depend on bilateral free trade agreements as the country will lose duty-free facilities and a host of trade preferences once it graduates to middle-income nation in some years.

Presently, as a least developed country, Bangladesh gets duty-free market access to European Union, Canada, Australia, Japan and some other countries. The country also gets duty-free access for a range of products in the Indian and Sri Lankan markets under the South Asian Free Trade Area (SAFTA).

Bangladesh has to go for bilateral FTAs for trade benefits once it becomes a middle-income country. Without FTAs, Bangladesh will lose competitive advantages over other countries -- such as India, Pakistan and Vietnam which have FTAs with a number of their trading partners.

It is believed that once Bangladesh graduates as a middle-income country, bilateral FTAs and regional trade agreements (RTAs) are likely to offer greater trade advantages.

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