Further studies underway on joining RCEP
The Bangladesh Trade and Tariff Commission (BTTC) is conducting further studies on possible outcomes of the country joining the world's largest China-led trade deal, Regional Comprehensive Economic Partnership (RCEP), Senior Commerce Secretary Tapan Kanti Ghosh said yesterday.
In July this year, the BTTC in a study said Bangladesh would greatly benefit in international trade if the country joins this mega regional trade deal.
"However, we need to conduct more studies before joining the RCEP as some terms and conditions seem tough for us to abide by," Ghosh told The Daily Star at his office in Dhaka yesterday.
So, the BTTC has been assigned to conduct studies on the RCEP further, Ghosh said, adding that Bangladesh's target was to grab a bigger market share under the 10-member Association of Southeast Asian Nations (Asean) trade bloc alongside another six countries by joining the RCEP.
"We could see that Bangladesh imports more from the RCEP signatory countries," Ghosh said, adding that Bangladesh has been looking to find ways to export more goods by signing the RCEP agreement.
Bangladesh imports textile materials and capital machinery from the RCEP nations.
Once Bangladesh makes the United Nations status graduation from a least developed country (LDC) to a developing one, preferential trade benefits will erode and Bangladesh will need preferential market access globally by signing trade agreements.
"We will sign trade deals keeping in minds three important factors including protecting our domestic industries, revenue generation by the government from import tariff and market access after the LDC graduation," Ghosh said.
"So, we are moving a bit slow in signing the trade deal," he added.
For instance, Bangladesh imports goods worth more than $20 billion from China, the country's single largest source for imports, from where the government receives nearly Tk 30,000 crore in the form of import tariff.
Similarly, Bangladesh imports goods worth more than $16 billion from India, the second largest source for imports, and the government earns nearly Tk 20,000 crore from it as import tariff in a year.
Once, the country makes the graduation from an LDC to a developing nation in 2026, Bangladesh will have to gradually liberalise its tariff regime for other trading nations for which the government will lose a big amount of revenue from import duty.
In the particular case of the RCEP, Ghosh said Bangladesh has up to December next year to inform whether it would be joining the RCEP.
Currently, Bangladesh has been negotiating with different trading partners to sign free trade agreements (FTAs), comprehensive economic partnership agreements (CEPAs) and preferential trade agreements (PTAs) to retain preferential trade benefits after the LDC graduation.
However, so far, Bangladesh could sign only a PTA with Bhutan in December 2020 enabling 34 Bhutanese goods zero-duty market access to Bangladesh and 100 of Bangladesh's to Bhutan.
Retaining the duty-free market access for Bangladesh is very important as more than 73 per cent of the country's exports come under the purview of benefits enabled for LDCs and as an LDC, the country enjoys duty benefits to 38 countries.
A recent estimate of World Trade Organization (WTO) said after the LDC graduation, Bangladesh would lose 15 per cent of trade.
If the export value of $42.61 billion of last fiscal year is taken into account, there is a possibility of losing $6.39 billion in a year after the LDC graduation.
The loss will be substantial in the markets of Canada, Japan and European Union due to the increase of tariffs to around 14.47 per cent, 8.89 per cent and 8.91 per cent respectively, said Mostafa Abid Khan, former member of the BTTC, in an article recently.
Earlier in July this year, an inter-ministerial meeting agreed that the county would join the RCEP if an opportunity was created after negotiations.
China initiated the RCEP as a free trade agreement among itself, the 10 Asean states and Australia, India, Japan, South Korea and New Zealand.
India later refused to join the RCEP. The negotiations were formally launched at an Asean summit in Cambodia in November 2020.
In 2017, prospective RCEP member states accounted for a population of 3.4 billion or 45 per cent of the world's population and about 40 per cent of world trade.
The total gross domestic product (GDP) amounted to $49.5 trillion, more than half of which is made up of that of China and India, surpassing the combined GDP of Trans-Pacific Partnership (TPP) members in 2007.
On January 23, 2017, US President Donald Trump signed a memorandum that stated withdrawal of the country from the TPP, a trade agreement between 12 Pacific Rim economies, a move which is believed to have improved the chances of success for the RCEP.
According to estimates by PricewaterhouseCoopers, the GDP of the RCEP member states is likely to amount to nearly $250 trillion by 2050.