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FTA - Learning from neighbors and competitors -The Asian Age


Bangladesh is the only country with no bilateral free trade partners anywhere. All the competitors of Bangladesh have multiple free trade agreements (FTA) with their respective trading partners, As the few examples, Afghanistan has four FTAs, Bhutan - three, Cambodia - nine, India - 28, Indonesia - 17, South Korea - 21, Lao PDR - 11, Myanmar -11, Malaysia - 21, Pakistan - 16, Philippines - 11, Sri Lanka - seven, Thailand - 22 and Vietnam - 17 FTAs. Bangladesh signed some regional trade agreements as well, such as SAFTA, APTA, SAPTA, and BIMSTEC. 

Bangladesh is enjoying duty-free facility in Canada, Australia and Europe. It will lose the opportunity after graduating from the least-developed country status by 2024. Our close neighbor and competitor Vietnam has entered into trade agreements with 55 nations. 

Vietnam, a comparatively small economy, has signed 17 FTAs with powerful blocs like the European Union, and large economies like Japan and South Korea. 

Vietnam is currently host of 21,666 foreign direct investment (FDI) projects worth US$293 billion, with investors from more than 100 different countries. All these investments go to Vietnam to take the opportunity of TPP agreement for export to US market.

The world is grouping in few major trade groups of such as RCEP, TPP and TTIP. The Regional Cooperation Economic Partnership (RCEP), a proposed trade initiative including the 10 ASEAN members and China, Japan, South Korea, India, Australia and New Zealand, has been the most talked about recently. 

Negotiations on the RCEP started in 2012 and 16 rounds have been completed so far, covering trade in goods and services, competition policies and dispute settlement, among other things. The RCEP would be the largest free trade bloc in the world, accounting for 40 per cent of global trade and 45 per cent of the world's population, with a combined GDP of US$22 trillion and set to finalize by end of 2018.

Trans-Pacific Partnership (TPP) is another FTA with US, Australia, Canada, Japan, Malaysia, Mexico, Peru, Vietnam, Chile, Brunei, Singapore and New Zealand has been formed but US President withdraw from the treaty after assuming his office on 22nd January 2017 but actively considering to enter in to the agreement again. 

Currently, Bangladesh has tariff-free access to most of the TPP member markets under its least developed country (LDC) status and although US does not give such market access. Bangladesh will certainly going to lose the market of member countries under TPP. 

The Transatlantic Trade and Investment Partnership (TTIP), is a proposed free trade agreement that would link two of the world's largest economies USA and EU. TTIP is about reducing the regulatory barriers to trade for big business, things like food safety law, environmental legislation, banking regulations and the sovereign powers of individual nations. This proposed trade block is in a primary negotiation stage.

Bangladesh is in venerable position with very small market segment and limited market. Bangladesh's export trade will be affected after implementation of the TPP pact since garment products cover 80% of the total exports to TPP member countries. 

Bangladesh may also lose the third and fourth largest export markets in Canada and Japan. Not only Garments, export of frozen fish, pharmaceuticals and agricultural products might be hit hard. Some imports might also become costlier challenging for Bangladesh following the pact. 

The pact might take at least two years to be implemented. Not only RMG will be affected but non-RMG exports of Bangladesh will also be affected. But our immediate and primary concern is that the regional and global FTAs are either signed or in process of sign shall drive way from our weak presence in US and EU markets. 

The RCEP and TPP are formed with most of the major economic powers along with India and Vietnam will have a very serious impact on export of Bangladesh. 

Bangladesh has import of major products from a number of countries include China, India, Germany, Thailand, USA, Malaysia, Korea, Japan, Netherlands, Taiwan, Pakistan, Hong Kong, France, Indonesia, Italy, Spain, Turkey, Italy, Indonesia, Singapore, UK, Belgium, Brazil, Russia, Canada, Mexico, Australia and Argentina.
 
On the other hand, there is least opportunity left to enter into duty free and quota free market emerging countries (LDCs and developing) because of proliferation of Regional Trade Agreements (RTAs), Economic Partnership Agreements (EPAs), Bilateral Foreign Trade Agreements (BFTAs) and Comprehensive Economic Partnership Agreement (CEPA) in all strategic combinations. The prospective countries are already tie up with each other's in different FTAs. 

There are a number of countries have expressed interest to sign bilateral FTAs with Bangladesh. Bangladesh Tariff Commission under the "strict supervision" of Ministry of Commerce has analyzed the prospect and opportunity of FTA with these countries.  

They are either observed that Bangladesh will "lose" revenue due to FTA with countries having trade deficit (more import than export)  and incase of Trade surplus countries (more export than import) study observe that the benefit is not "significant". 

The outcomes of all the studies are negative. The tax departments of developing countries habitually to collect tax at source or in advance. National Board of Revenue (NBR) set the policy of collecting income tax, customs duty and VAT at sources. 

At present the advance tax is about 70% and only rest 30% collected afterward with due assessment. Bangladesh should come out of the policy of "easy earning" of Tax at import stage. The nation is set to suffer due to easy going practice of administration. Thus, a proactive political role is urgently needed with regard to overall stand of the government regarding FTAs. 

It has never approached with and any country for signing FTAs, while it has yet to take decision regarding a number of proposals submitted by prospective countries. Till date as many as 50 countries are either offer to sing FTA or making queries at different levels regarding FTAs and/or preferential market access. In some occasion, some Ministers voice their interest to sign FTA with some neighbors. 

China has offered to bear the cost of study feasibility of FTA between China and Bangladesh and Bangladesh has responded very reluctantly. A delegate from Ministry of Commerce has visited China after cancellations of few occasions.  The reluctance to go for overseas visit is a surprise exception as they very much like to visit other countries. 

After a long negotiation and persuasion by USA, Bangladesh has signed The Trade and Investment Cooperation Framework Agreement (TICFA). Bangladesh is still struggling to convince the United States Trade Representative (USTR) to re-introduce the existing preferential market access facility with GSP facilities for all products including garments. Now bilateral FTA with USA may also be negotiated using the platform of the TICFA. 

It can initiate dialogue with EU for FTA so that an agreement can be signed before graduation to developing country by 2024. The negotiation of a FTA require about 10-12 years. Moreover, Bangladesh may need more time to reform internal law and rules specially the customs and investment related laws to facilitate FTA.

Bangladesh should not wait or decline the proposals of FTA from other countries; rather it should take a proactive initiative of FTA. It may improve internal capacity to join any FTA and try to join TPP and RCEP; otherwise, it will be isolated from the world in the globalized economic scenario. 

Bangladesh may also consider entering into FTA with the regional mega blocks such as ASEAN, GCC, Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) in order to have access to newer and prospective export destinations. 

The occasional political statements of Ministers about signing FTA are not sufficient to face the certain challenge of bilateral, regional and other block FTAs. There is no visible step or internal preparation to sign any FTA. Recently a Minister urged Sri Lanka to get ready for FTA although the request of FTA from Sri Lanka is pending with Bangladesh government without any positive step for signing any such agreement. 

We much urgently undertake internal reforms of different law and rules and go for active negotiation for FTAs and try to enter in to already operational FTAs or under negotiation trade blocks such as RCEP, TPP and TTIP.  The time is very short before we become isolated in the global market. It is surprising why we don't learn from our neighbors and competitors.


The writer is a Legal Economist. Email: mssiddiqui2035@gmail.com