Time for tariff reforms to improve trade competitiveness: experts

Tariff  rationalisation is extremely important for Bangladesh to boost exports, improve trade competitiveness and maintain steady economic growth,  speakers said yesterday.

"Tariff rationalisation is a big  challenge as it affects export. This is the high time for the formation  of the national tariff policy," said Zaidi Sattar, chairman of the  Policy Research Institute (PRI) of Bangladesh.

Also, tariff  protection is a significant barrier for signing the Preferential Trade  Agreement (PTA) and Free Trade Agreement (FTA) and attracting foreign  direct investment, he said.

"Time is ripe for a forward-looking  trade agenda that goes beyond tariffs to include factor and non-factor  services exports, digital technologies, and climate-related reforms as  well as flexible thinking on regional cooperation, FDI and FTAs to boost  competitiveness."

He was speaking at a virtual discussion on  "Boosting Bangladesh's Trade Competitiveness" jointly organised by the  PRI and World Bank.

According to speakers, the export  led-economic growth of the country will further face challenges in the  post–LDC (least-developed country) period as the trade benefit will  erode.

So, Bangladesh needs to deepen integration with other  countries and trade blocs to maintain the current export growth after  graduation as attaining preferential market access to the European Union  might be difficult.

The country also needs to improve export and  market diversification as the export is highly concentrated only in  garment items, they said.

Speaking at the event, Commerce  Minister Tipu Munshi said Bangladesh has the capacity to sustain any  shock in the export trade as the government and local exporters have  improved capacity.

For instance, Bangladesh has overcome the severe fallouts of Covid-19 as garment shipment rose  despite the coronavirus pandemic.

During the difficult period,  local exporters have stepped up to make even personal protective  equipment to offset the export shock.

The government is  negotiating with the major trading countries to sign PTAs, FTAs and  Comprehensive Economic Partnership Agreement (CEPA) to address the trade  benefit in the post-LDC era.

MA Razzaque, research director of the PRI, said more than 22 per cent of revenue collection will drop after the LDC graduation. However, with the current capacity and competitiveness, Bangladesh's export earnings should have crossed $100 billion.

If  Bangladesh can't manage to obtain the GSP Plus status in the EU market,  local exporters will have to face tariffs under the  most-favoured-nation criteria, Razzaque said. "The tariff regime  of Bangladesh needs to be immediately reformed," said Hoon Sahib Soh,  practice manager of the World Bank, adding that the high protection does  not facilitate export-led economic growth.

Bangladesh  participates less in the global value chain (GVC), said Nora Carina  Dihel, senior economist of the WB, adding that with the para-tariffs,  tariff rates in Bangladesh increase from 6 per cent to 50 per cent. She said GVC participation and regional linkage increase export survival.

Csilla  Lakatos, another senior economist of the WB, said Bangladesh's lack of  export diversification can be partially attributed to the protective  trade regime.

The impending erosion of trade preferences due to  graduation from the LDC status further challenges Bangladesh's export competitiveness.

Rizwan Rahman, president of the Dhaka  Chamber of Commerce and Industry, said the government has reduced the  corporate tax by 5 percentage points over the last two fiscal years. "Such gradual reduction should be continued to make the rate rational."

Sadiq Ahmed, vice-chairman of the  PRI, said Bangladesh should be justifiably proud of its export  performance and for the export recovery from the severe fallouts of  Covid-19.

Yussuf Abdullah Harun, a lawmaker, also spoke.