WTO extension could yield multiple perks beyond 2026: experts
The World Trade Organisation's (WTO) decision to continue LDC-linked trade benefits for graduating least-developed countries will not only help Bangladesh avoid potential export losses for several years beyond 2026 but also allow it to attract much-needed investments, experts said.
The General Council of the Geneva-based intergovernmental body reached a decision on October 23 in its efforts to assist the LDCs on track to graduate.
The LDC category was established by the United Nations General Assembly in 1971. There are currently 46 LDCs, some of which are set to leave the category soon.
Since the WTO's sixth ministerial meeting in Hong Kong in 2005, the developing and developed countries have been giving zero-duty benefits to the LDCs for 97 percent products they ship.
After the graduation, set for November 2026, Bangladesh was supposed to be substantially impacted by the phasing-out of preferences. For example, total exports are projected to fall by $5.37 billion annually owing to the imposition of duties, according to the WTO.
Most of the benefit cut is expected in the European Union, which may amount to a fall of $5.28 billion. Of the $55 billion merchandise exports in 2022-23, $25 billion, or 45 percent, came from the bloc.
Exports to Canada, Japan and South Korea could also be affected.
The bulk of the reduction in exports is projected to take place in clothing, which accounts for nearly 85 percent of Bangladesh's shipments abroad.
T-shirts (cotton), trousers for men (cotton) and jerseys (fibres and cotton), are among the products that might feel the pinch in terms of value.
But thanks to the latest decision from the WTO, Bangladesh will not lose the amount for a few more years after 2026.
Bangladesh has sought an extension of the LDC trade facility under the WTO multilateral system, which includes the Trade-Related Aspects of Intellectual Property Rights (TRIPs) for pharmaceutical products, for six more years after becoming a developing country in three years.
Senior Commerce Secretary Tapan Kanti Ghosh said the WTO did not say when the announcement would be made. It may come in the next WTO Ministerial Conference.
The graduating LDCs, however, will have to follow the rules of a particular country's trade scheme, he said, adding that the negotiation is underway for the extension of the TRIPs waiver.
The announcement might be made at the 13th WTO Ministerial Conference in Abu Dhabi scheduled for February 2024, said Md Abdus Samad Al Azad, joint secretary of the commerce ministry.
Mustafizur Rahman, a distinguished fellow of the Centre for Policy Dialogue, a private think-tank, welcomed the development, calling it as good news for Bangladesh since local exporters will enjoy the duty-free benefit for a few more years after 2026.
"If the decision is taken at the WTO's multilateral system, local pharmaceutical products will also benefit."
Md Shahidullah Azim, vice-president of the Bangladesh Garment Manufacturers and Exporters Association, said new investments will flow into the country as local suppliers will enjoy the zero-duty export benefit.
"The WTO's decision will help the BGMEA attain its $100-billion shipment goal by 2030."
Some countries such as the UK and Australia already said they would continue the trade benefit for Bangladesh after 2026.
"Now the WTO has made it broader for Bangladesh. Obviously, this is good news for us," said Azim.
Kazi Belayet Hossain, president of the Bangladesh Frozen Foods Exporters Association, says the decision will have a positive impact on the shipment of frozen foods.
At present, Bangladesh is the top user of duty benefits among the LDCs, utilising up to 67 percent of the trade privileges dedicated to the group. More than 73 percent of the country's exports enjoy trade benefits.