Duty-free trade facilities for Bangladeshi products in China

A huge diplomatic achievement of the current government

Tarun Kanti Das

(Continued from last days section)

In my opinion, experts from Bangladesh and other countries would also welcome the signing of the FTA agreement between Bangladesh and China and some other countries. Generally, bilateral trade depend on the mutual interests of both parties. Potential FTA partners for Bangladesh will be Argentina, Brazil, Chile, China, Chinese Taipei, Malaysia, Mexico, Korea, Russia, South Africa and Ukraine.

In the list of top ten exporting products, there are no common products of India, China and Bangladesh. Also the level of mutual competition is very low. There may be some concerns over the proposed FTA signing between Bangladesh and China considering the trade competition between the neighboring countries. 

Due to this agreement, there should not be any deviation or suffix in the traditional relations with the neighboring friendly countries. However, in the long run, a significant portion of the total trade could be taken over by China. Moreover, in the future, the demand for textiles and other products from China, most of which Bangladesh has been exporting on a large scale, may subsequently reduce the demand for similar products from other countries in the Chinese market. 

In this situation, neighboring countries should reduce concerns and strengthen trade relations with Bangladesh by strengthening trade and investment promotion. Note that Bangladesh and India already have an FTA agreement through the South Asia Free Trade Agreement (SAFTA).

For Bangladesh, the FTA agreement with China represents a golden opportunity, giving it access to the world's third largest economy after the European Union and the United States. This will help Bangladeshi businesses to create a level playing field between their Pakistani, Maldivian, Chilean and Costa Rican competitors.

Although there is a geopolitical equation that can be seen as a challenge to trade competition between the United States and India in the FTA agreement between Bangladesh and China. The argument that signing an FTA with China or any other major economy would hurt the interest of Bangladesh's local industry is not timely at all and has no logical basis. If this argument were still valid, no such FTA would have been signed with any of the least developed countries anywhere in the world.

The development of Bangladesh's exports will not require any other apparently duty-free and quota-free entry into the markets of the economy. It is better to discuss such benefits with willing partners like China now. Bangladesh has always had strong trade relations with China, or any other country, including India. From now on, Bangladesh should also look for FTAs with the United States and the EU to compete with countries in Asia and Africa in these two markets.

As China moves towards a consumer-oriented economy, it is natural to have a variety of services as potential beneficiaries of free trade with China as a result of growing demand. This could help Bangladesh reduce its unemployment rate and open up new avenues for earning foreign exchange. Among the biggest beneficiaries and winners of the FTA are the Bangladeshi sectors associated with agro-food, leather, textiles, manpower and natural resources, as domestic demand for such products in the Chinese market continues to grow.

The reality is that our ready-made garments have taken a place in the Indian market. We have to hold on to it.  We not only have duty-free facilities or increase tariffs in China, also we have good quality of clothing. All in all, when traders see where they can do more business, it is normal for them to do business there. As the market in India is as big as it is in the nearest neighboring country, the 'transportation cost' is much less. There is also a growing number of middle class people who want to buy clothes from the market and wear them, and mainly for such people, as the popularity of Bangladeshi-made clothes grows, so does the export.

In 2016, Bangladesh earned  28 billion by exporting ready-made garments. A full-fledged 2018 account has not yet been obtained, but it is certain to have crossed  30 billion dollar. The government has announced to increase it to 50 billion by 2021. "If growth continues like this, it will be possible to achieve this target by 2024, even if not in 2021. There is no doubt about it." This income was 11.49 percent more than the previous financial year. In the last 2016-17 financial year, the income from garment export was 3 thousand 61 crore dollars.

The country's overall export earnings have touched a milestone of 40 billion, or  4 thousand crore dollar, based on good growth in garment exports. Finally, in the outgoing fiscal, export earnings stood at, 4,053 billion. This income is 10.55 percent more than the previous financial year. In the last 2016-17 financial year, the export income was 3,666 crore dollar.

According to the EPB, in the outgoing financial year, the export of leather and leather products earned 101 crore dollar. However, in this case, the export has decreased by more than 6 percent. The export income of agricultural processed products has been more than 90 crore 89 lakh dollars. This income was 34.92 percent more than the 2016-17 financial year. Besides, the export of jute and jute products has earned 81 crore dollar, which is 20.41 percent less than the 2017-18 financial year.

Most of the total revenue collected from import duty every year comes from Chinese goods.

Goods from China are worth more than 14 billion dollar and the government earns BDT. 23,000 crore  a year from Bangladesh import duty. It is also true that the government will not get a share of this income now.

Entrepreneurs' dream of 60 billion dollar in exports by next year will be fulfilled through new market expansion and FTA. The United States and Canada, the 28 countries of the European Union, are the main markets for garment exports. Apart from these 29 markets, garments made in Bangladesh are now being exported to different countries of the world. Brazil, Chile, Peru, Mexico, Argentina, Russia, South Africa, Australia, New Zealand, Middle East, Turkey, China, Japan, Korea and India are some of the obsolete markets. The hope is that while the export growth of conventional markets is declining, the growth of these unconventional markets is on a positive trend. The growth of garment exports in the unconventional market is good. It will be possible to increase garment exports with the expansion of new markets through FTA. Therefore, it was imperative to have FTAs with a few countries quickly, as a reflection of the fact that the duty-free quota-free trade agreement with China on this 97% export of Bangladeshi goods is very timely, which is a great economic and diplomatic achievement of the present government.


Tarun Kanti Das is Senior Vice President, Bangladesh-China Business Association (BCBA), Bangladesh and a member of International Affairs Sub-Committee, Bangladesh Awami League