Bangladesh can gain partially from US trade tariff imposed on Chinese products only through the readymade garment sector despite the fact that Vietnam has diversified opportunities for benefitting from this situation.
The long-term effect depends on the intensity of the situation, but in all, the global growth will decrease as a consequence of the shrinking consumer demands which will put severe negative impacts on Bangladesh’s trade.
Dr. Selim Raihan, Professor, University of Dhaka and Executive Director, SANEM said this at a workshop on “Emerging Trade Scenarios: Implications for Bangladesh” held at SANEM office in Dhaka on Saturday organised by SANEM International Trade Centre.
Dr. Zaidi Sattar, Chairman, Policy Research Institute, Md. Munir Chowdhury, Director General, WTO Cell, Ministry of Commerce, spoke at the workshop. The workshop began with opening remarks from Dr. Selim Raihan.
Dr. Selim discussed five key aspects of the global trade scenarios, starting with the current trade war. He explained the whole idea of institutions like GATT and WTO was to bring international trade and trade disputes into a streamline.
Then he moved on to the issue of mega trading blocs, where he discussed two major blocs- TPP (Trans Pacific Partnership) and RCEP (Regional Comprehensive Economic Partnership). “TPP covers almost 40 percent of the global GDP, while RCEP covers 40-45 percent of global GDP and trade. This is an exceptional example of trade blocs, as these are not limited within the neighbouring countries or regions”, he said.
The challenges for Bangladesh under this scenario according to him are risk of preference erosion, risk of being left out and escalating challenges after the LDC graduation.
The second session on “Trade Policies of Bangladesh” was conducted by Dr. Zaidi Sattar. “Outside the RMG sector, our trade policy is a mess. It lacks direction”, he said. He discussed the background history of Bangladesh’s trade policies and scenarios. This was followed by the discussions regarding policy instruments, trade policy for RMG, tariff and protection trends and tariff escalation, protection and anti-export bias, costs of protection and way forward with trade policies. “Bangladesh’s tariff schemes are not pro-development at all. We cannot gain the desired outcome from exports if we don’t reform the incentive system in favour of exports, rather than the domestic markets. Our trade scenario is distorted by the excessive tariffs. For the developed countries, the main source of taxation is not trade tax, but income tax”, he said.
Bangladesh started taking up export-oriented trade policies in the 90s. “We moved towards an outward looking economy from an inward looking economy. But Bangladesh’s tariff regime is still unfriendly to exports”, he said. He also said, “Vat is not supposed to be a supplementary duty tax, it is supposed to be a trade neutral duty, with 50 percent on the domestic products and the other 50 percent on the foreign products.”
According to him, the success in the RMG sector comes from creating a free trade channel for exports. The tariff policy is somewhat flexible for the RMG sector in our country. This is a right approach towards policy making in terms of trade, according to Dr. Sattar.
He said, “We have some sort of anti-export biased policies when it comes to trade. We create tariff barriers and have less incentives for exports. On the other hand, higher protection delivers higher profit to the foreign exporters as well. Everybody knows that we need to execute an export oriented policy, but nobody is doing anything about it. This does not create a level-playing field.” According to him, effective tariff protection works more when input tariffs are lower and output tariffs are higher.
Bangladesh’s consumers have to pay higher prices for consumer goods, which are above international prices than other countries, taking a heavy toll on the middle class. The session was followed by an interactive question answer session.
The third session on “LDC Graduation and Challenges for Bangladesh” was conducted by Md. Munir Chowdhury. He discussed a bit about the inbuilt policies and ongoing processes of WTO. He put emphasis on the difference in the LDC graduation between Bangladesh and other countries, due to Bangladesh’s huge population. Trade arena needs a lot of experts and good researchers, according to him. He discussed about the Istanbul Programme, which aims to enable half of the LDCs to meet the graduation criteria by 2020. “Bangladesh’s five year plans are well linked to this prospect of graduation. The graduation will attract a lot of foreign investments, but the challenges are the reduced benefits and credit-worthiness of the country after the LDC graduation.”, he said. He brought relevant examples of Ireland and Vietnam as well.
He also talked about the graduation process and smooth transition strategies. He said, “Growth in our economy in terms of macroeconomic indicators is quite evident, however, there are doubts regarding the income distribution, trade and other aspects. We also lack efficient governance from our side.” According to him, service sector in our country has not developed as per the expectations. Among the post-graduation challenges, access to market is an important one, which needs a well-structured strategic planning. The possible strategies include negotiations, alternative trade arrangements and increasing the competitive capacity in the long run. WTO agreements have many important aspects for us, such as flexibilities, export subsidies for non-agricultural products, transition periods, trade related investment measures, agriculture, trade negotiations, technical assistance, addressing the graduation challenges and many more. There are some challenges under the WTO rules, which include special and differential treatments and some service challenges as well. He discussed some of the key Intellectual Property laws in Bangladesh as well, in which he thinks Bangladesh has to work more. According to him, graduation will have little impact on Bangladesh’s participation and contribution in WTO. Some small changes might be made in terms of the technical assistance. He also talked about some possible policy changes in WTO and government initiatives. The session concluded with an interactive question answer session. The workshop finally came to an end with a closing remark and distribution of certificates to the participants.
