Bangladesh's exports to the EU will fall by 0.18 percent a year if India, Pakistan and Vietnam enjoy duty-benefit from the European bloc, according to a research paper.
India and Vietnam are in talks to sign free trade agreements (FTAs) with the EU, while Pakistan has been enjoying duty-free benefits for 75 products in the same market since January this year.
Bangladesh's main foreign currency earning garment sector will face a setback as the three countries are strong players in the segment.
Bangladesh's GDP will also be reduced by 0.27 percent as the country will lose $54 million annually from its single destination, said the research paper prepared by Bangladesh Foreign Trade Institute (BFTI).
“Total exports to the EU will come down by 0.18 percent a year. Bangladesh's terms of trade and exports of textiles and clothing could fall by about 1 percent,” Mohammad Masudur Rahman, a research fellow of the BFTI, said in the paper.
The BFTI is a public-private partnership research organisation, which deals with internal and external trade related activities.
With the erosion of competitiveness of Bangladesh in the EU market, Pakistan will gain an additional $674 million annually, while India $1.75 billion and Vietnam $898 million, the paper said.
Not only exports, their GDP (gross domestic product) will also rise -- 2.10 percent for Pakistan, 0.67 percent for India and 2.46 percent for Vietnam.
Of the 75 Pakistani products that got the zero-duty benefit, 55 are garment items. Bangladesh also produces these 55 items and has a strong market in the EU.Once the FTAs are signed, India and Vietnam will enjoy zero duty in the 28-nation bloc, which will affect competitiveness of other countries.
Bangladesh has been enjoying duty-free benefits for almost all exports to the EU since 1971, when the EU had introduced the GSP (generalised system of preferences) scheme for least developed countries.
As India is a very strong competitor for Bangladesh in the EU market, the FTA between the EU and India could displace Bangladeshi products, the paper said. India has a competitive edge over Bangladesh's top export items except jerseys, pullovers and cardigans.
Bangladesh exported $13.7 billion worth of goods to the EU in 2011. The average growth of exports to the EU between 2007 and 2011 was 13.8 percent. Although the EU sources only 0.5 percent of its imports from Bangladesh, it is a destination for more than 58 percent of Bangladesh's exports, the paper said.
Total exports to the EU from Pakistan, India and Vietnam were $81.21 billion in 2011, according to the paper.
“Bangladesh will need to diversify her exports to sustain and capture more market share in the EU.”