Small export basket failing Chinese trade benefit
Bangladesh can make little use of the generous duty benefits offered by China simply because of its narrow export basket, with the situation compounded by the fact that the products are low in demand in the East Asian country.
Prior to 2020, China had been offering duty-free access to 97 per cent of Bangladeshi products, or 8,547 types of products to be precise, exported there.
From September, it is to bring within the benefit's purview one more percentage point of products, or 383 new products.
China says it considers Bangladesh an important trading partner and it wants to reduce the trade imbalance between the two countries.
But the problem lies in the fact that of Bangladesh's annual export earnings, more than 84 per cent is generated from garment items, the manufacture of which is a key strength of China.
China says it considers Bangladesh an important trading partner and it wants to reduce the trade imbalance between the two countries
China is the largest exporter of apparel worldwide. It exported more than $180 billion worth of clothing items to the European Union and $90 billion to the US in 2021. The country's import of clothing items from the world amounted to $9.7 billion in 2021.
So, even if China offers zero-duty benefit to every Bangladeshi product being shipped to that country, there is hardly any scope for Bangladesh to increase its export earnings.
"We cannot enjoy the Chinese duty benefit unless and until we can grow our product basket as China is already very competitive in apparel items in global business," said MA Razzaque, research director of Policy Research Institute (PRI).
The demand for Bangladesh-made garment items in China is low as China itself is strong in the manufacture of garment items, he said.
However, now is the time for Bangladesh to utilise the duty benefits in another way -- highlighting it to businesses abroad, including those in China, so that they become interested in availing it through investments in Bangladesh, said Razzaque.
Many Chinese companies are looking for alternative manufacturing bases for the contentious trade relationship with the US, he said.
It is understandable that the Chinese government also wants its local companies to shift their production bases to other countries like Bangladesh so that they remain immune from the volatility in trade with the US, Razzaque said.
So, Bangladesh should make use of the generous Chinese duty benefits from an investment perspective, not only as a window for export, Razzaque said.
Razzaque, also the chairman of the Research and Policy Integration for Development (RAPID), in a study in June this year said China was not only one of the largest exporting countries but also an importer of goods worth $2.7 trillion as of 2021.
Bangladesh could not take up this opportunity of entering the Chinese market as the country does not have a wide variety of products, he said.
In fiscal 2021-22, Bangladesh exported goods worth $683.43 million, of which a majority was apparel items.
In the preceding years, the figures were $680.65 million, $600.1 million and $831.2 million respectively, according to data from the Export Promotion Bureau (EPB).
Abdur Rahim Khan, additional secretary to the commerce ministry, said the 1 percentage point increase in duty benefits may come into effect from next month as the Chinese government had just announced the decision.
So, it is too early to state which products had been offered the duty benefit, he said.
Khan echoed Razzaque's views, saying that Bangladesh cannot take this big trade benefit of China as the country's exports are not diversified.
Khan also said it was not yet clear whether China would continue to offer the current duty benefits once Bangladesh makes the United Nations status graduation from a least developed to a developing country in 2026.
Khan, however, suggested that local exporters to increase the types of goods they manufactured as the government has been paying a lot of cash incentives on export receipts such as 1 per cent to 4 per cent on apparel and up to 20 per cent on agro-processed goods.
Bangladesh's share in China's import is just 0.04 per cent. Increasing the share to just 1 per cent would generate an additional $27 billion, Razzaque said.
Md Saiful Islam, president of the Metropolitan Chamber of Commerce and Industry, said the duty benefit may not bring cheer for Bangladesh as the locally-made items were not competitive in Chinese markets.
Because the Chinese retailers and brands prefer locally-made items rather than imported goods as they can also meet the quality and demand, Islam said.
However, if Bangladesh can produce the goods for globally renowned brands, the Chinse buyers will come to Bangladesh, he said.