China offers generous duty privilege

Here's a spot of good news amid the doom and gloom.

China, the biggest trading partner of Bangladesh, has granted zero-duty benefit for 97 per cent of the country's export items, a development that might provide some respite to exporters who are struggling to remain afloat amid a plunge in orders from Western buyers.

"This is a generous duty privilege," Sharifa Khan, additional secretary (free trade agreement) of the commerce ministry, told The Daily Star over the phone.

Bangladeshi exporters can enjoy the benefit from this month, she said, adding that China has granted the privilege both bilaterally and under the Asia-Pacific Trade Agreement (APTA).

"So, in a sense, the Chinese offer is broader compared with those provided by other countries."

Earlier in 2015, China offered various least-developed countries (LDCs) extensions on the trade benefits for up to 97 per cent of their goods.

However, the nations that took up on the offer were no longer allowed to enjoy the benefits under the APTA.

Then again China gave Bangladesh an option that if it withdraws its name as an APTA beneficiary, it would grant the 97 per cent package to Bangladesh like the one extended to other LDCs.

Bangladesh agreed to the proposal and applied to the Chinese government for the 97 per cent package instead of 65 per cent under the APTA.

However, after the final negotiation, China granted the 97 per cent privilege along with the APTA benefit as China thinks Bangladesh is a very important trading partner for them, Khan added.

"We must take preparations such that we can utilise this opportunity as China itself is one of the biggest consumer markets in the world," said Abdur Razzaque, research director of the Policy Research Institute (PRI).

The benefit will also help Bangladesh increase shipments of new products like pharmaceuticals and some non-traditional items. As a result, Bangladesh has got an opportunity to diversify both its products and markets, Razzaque said.

Chinese tariffs are usually very high compared with those of the EU and the US, the two main export destinations for Bangladesh.

For instance, the average tariff to the EU is 12 per cent -- but Bangladesh does not face any duty to the EU as an LDC -- and Bangladeshi exporters face on average 15.62 per cent duty on shipments to the US.

On the contrary, the tariff rates the exporters face in the Chinese market vary from 25 per cent to 30 per cent.

So, Bangladesh will not need to compete with countries like Vietnam in the Chinese market, which is why the demand for Bangladeshi goods, especially apparel, will rise further in China, Razzaque said.

Recently, many Chinese garment factories have shown interest to move out to Bangladesh for the higher cost of production and a shortage of skilled manpower in their apparel industry.

Granting a zero-duty benefit for Bangladeshi goods in the Chinese markets indicates that both the Chinese government and private sector are shifting their focus towards Bangladesh.

Because of the duty privilege, in future the Chinese manufacturers might make their goods in Bangladesh to export those to their own country, experts said.