New debate emerges over rules of origin

Second from left, Hedayetullah Al Mamoon, senior secretary of the commerce ministry, speaks at a discussion on the rules of origin organised by the MCCI and BFTI in Dhaka yesterday. Syed Nasim Manzur, president of MCCI, was also present. Photo: Star

A new debate has emerged over the rules of origin as the World Trade Organisation wanted to know from least developed countries whether further relaxation of the rules will benefit such countries.

As Bangladesh is an LDC, the commerce ministry is now seeking opinions from experts and business community.

To this end, the Metropolitan Chamber of Commerce and Industry, and Bangladesh Foreign Trade Institute organised a discussion on "Bali decision on preferential rules of origin for LDCs: issues for Bangladesh" at the MCCI office in Dhaka yesterday.

Rules of origin are the criteria that are used to define where a product was made. The origin of a product is important because it will determine how it is treated at the border of an importing country and the origin may impact the import duty payable and admissibility into the country. If the rules of origin are relaxed, it might erode competitiveness of the backward linkage industries of Bangladesh, Manoj Kumar Roy, additional secretary to the commerce ministry, said at the discussion.

Businesses will lose interest in investing in backward linkages like spinning and weaving if all exportable items are made of imported goods, he said.

However, Mostafa Abid Khan, a director of the foreign trade institute, said, if the rules of origin are relaxed further, it will boost product diversification.

Khan said, as the EU relaxed the rules in January 2011, exports from Bangladesh to the European bloc rose 16 percent on average until 2013.

But the growth was only 10 percent between 2003 and 2010, meaning Bangladesh was benefitted from the relaxation of the rules, he said in a presentation.

After the relaxation of the rules by the EU, Bangladeshi garment exporters started enjoying zero-duty benefit on exports of garment items made even of imported fabrics.

But before the rules were relaxed, Bangladesh used to enjoy such a duty benefit only when the garments were made of local fabrics.

Khan said the relaxation of the rules is not enough to ensure a good export growth; the country needs to improve competitiveness worldwide. And for this, Bangladesh should improve infrastructure on a priority basis, Khan said.

“We need to decide whether we are happy with the existing rules of origin,” said Amitava Chakraborty, director general of the WTO cell at the commerce ministry.

MCCI President Syed Nasim Manzur said the "GSP Plus" benefit offered to Pakistan by the EU has become a threat to Bangladesh, as the two countries are competing in the same markets with the same types of products.

“We need to negotiate with Japan bilaterally, going beyond the WTO measures as this destination is very promising for us,” he said.

“We feel uncomfortable when people call Bangladesh an LDC. We are fast moving out of the LDC group,” said Hedayetullah Al Mamoon, senior secretary to the commerce ministry.