Go for free trade deal with EU instead of GSP

Trade economists yesterday suggested the government to sign free trade agreement with the European Union instead of seeking GSP Plus for continuation of trade privilege following graduation to the developing country bracket in 2027.

Last fiscal year, about $21 billion out of the country's total export receipts of $36.66 billion came from the EU, where Bangladeshi goods enjoy duty-free privilege under the GSP scheme as a least-developed country.

For continuation of the GSP scheme after graduation, Bangladesh will have to follow some stringent conditions like ratifying 27 UN Conventions and make improvements in four important areas: good governance, labour rights, human rights and environment protection.

But, the EU can cancel the trade privilege anytime, according to Selim Raihan, a professor of the department of economics at the University of Dhaka.

“So, it is better to sign the FTA with the EU.”

Raihan, also the executive director of South Asian Network on Economic Model (SANEM), suggested inking an FTA with the UK too once its Brexit negotiations are complete.

Bangladesh will lose 11 percent or $6 billion of business once it graduates to the developing country bracket in 2027, he said while presenting a study paper on LDC graduation and its impact. As an LDC Bangladesh enjoys trade benefit under different multilateral trading systems, but such trade preferences will go away upon graduation. For instance, Bangladesh will have to pay 12.5 percent duty for exporting to the EU, where 54 percent of the shipments from Bangladesh go.

Echoing with the views of Raihan, MA Razzaque, research director of the Policy Research Institute, recommended the government to open negotiations with the EU to sign the FTA without further ado. Razzaque and Raihan were speaking at a workshop on 'FTA: A tool for facing the LDC graduation challenge' at the CIRDAP auditorium in Dhaka.

The commerce ministry and the Bangladesh Foreign Trade Institute jointly organised the workshop, which was attended by businessmen, policy makers, experts, trade body leaders and government high-ups.

Razzaque suggested signing the FTAs with some important trading partners such as free trade deals will act as prime facilitators for continuing the country's overseas trades after the graduation. As a test case, Bangladesh can sign an FTA with Sri Lanka, he said.

“The signing of the country's maiden FTA will give experience to negotiators for signing more such deals,” he added.

Md Shafiqul Islam, additional secretary to the ministry of commerce (FTA wing), called for making effective the existing preferential trade deals.

Bangladesh will not face any major hurdle in obtaining the GSP Plus benefit to the EU as the country has been doing business with reputation in this trading bloc, said Ali Ahmed, chief executive officer of the BFTI.

For the GSP Plus benefit, the seven largest products from a country must represent more than 75 percent of the country's total exports over a three-year period. “This is very much possible for Bangladesh,” Ahmed said.

Secondly, the country's three-year average exports under the scheme must represent less than 6.5 percent of the value of the EU's total GSP imports from all the beneficiary countries, he said. Currently, Bangladesh's share is 9 percent, which is higher than the threshold.

Ahmed suggested opening negotiations with the EU to raise the threshold to 15 percent just for Bangladesh.