Trade war a boon for Bangladesh: ADB

• GDP will grow 0.19pc more and exports will rise by an additional $400m if trade war escalates

Bangladesh's gross domestic product (GDP) will grow 0.19 percent more within the next one or two years if the US-China trade war escalates further, the Asian Development Bank's (ADB) chief economist said on Monday.

Moreover, the country will be able to make exports of an additional $400 million, said Yasuyuki Sawada.

Bangladesh will receive a lot of work orders, mainly shifted from China—the largest apparel supplier worldwide—because of the tariff war, he said.

Four countries will mainly benefit from the shifting of work orders and foreign direct investment due to the trade war -- Vietnam, Cambodia, Thailand and Bangladesh, said Sawada.

He was presenting a keynote at a seminar on “Impact of emerging international trade relations on Bangladesh” at the Radisson hotel in Dhaka.

Economists from home and abroad, ADB high-ups and researchers attended the seminar which had Commerce Minister Tipu Munshi as the chief guest.

“Garment, textile, IT and agricultural products seem to be exported more due to the trade war...Gains from trade redirection are not automatic or assured. There is a need to compete with others,” he said.

Also a higher domestic demand propelled Bangladesh's miraculous and extremely robust economic growth, he said. At the end of the year, the GDP growth would hit 7.5 percent, as was predicted in the first six months of this year, the economist said. However, the prediction is a little bit lower than the 7.9 percent that the country experienced last year.

The US was supposed to implement its decision of imposing tariff rates ranging from 10 to 25 percent on $200 billion-worth Chinese goods from March 1.

“We do not know whether the US is going to impose 10 to 25 percent tariff rates on another $200 billion or whether is it going for a withdrawal,” said Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD). “It depends on various scenarios,” he said while discussing on Sawada's presentation.

The implications might worsen if the trade war escalates, Rahman said. The US has been making the multilateral trading system of World Trade Organisation almost dysfunctional, the CPD economist said.

The WTO would have been the best trade guard for Bangladesh as this organisation practises the rule-based trading system, he said.

Rahman warned to be vigilant of the continuation of trade privileges when the United Kingdom comes out of the European bloc as England is not only Bangladesh's third largest export destination but also the hub for Bangladesh to reach other European countries.

Both the European Union and the United Kingdom promised to continue providing the generalised system of preferences facility after Bangladesh graduated in status from least developed to developing country, he said.

However, it is still a matter of concern how the “Rules of Origin” will be determined, Rahman said.

Bangladesh needs more entrepreneurs for new job creation and to reduce income inequality as the country is now on a development trajectory, he added.

“Investing in good infrastructure, providing good logistics and easy facilitation can help develop an efficient global value chain, and thereby attract global companies to move their production centres to Bangladesh,” said Manmohan Parkash, country director of ADB's Bangladesh office.

“Bangladesh is benefitting from the trade war as we are receiving more work orders over the last few months,” said Commerce Minister Tipu Munshi.

Mashiur Rahman, economic affairs adviser to the prime minister, said 35 percent of Vietnam's exports were machinery while garments attributed to only about 6 to 7 percent.

The drivers were foreign direct investment with foreign management and foreign expertise, the adviser said.