Thursday, November 26th, 2020
Tariff-free entry to China, Bhutan a landmark step
November 26th, 2020 at 11:27 am
Tariff-free entry to China, Bhutan a landmark step

Bangladesh-China friendship has seen a fillip in recent years with a large number of mega-projects being funded by Beijing which sided with Pakistan in the 1971 independence war.

Financial assistance from China is the second largest after Japan is impressive. Besides, China keeps its eyes on Bangladesh in most issues regarding economic development. China’s USD 38 billion investment in Bangladesh, in combination with USD 24.45 billion in bilateral assistance for infrastructure projects and USD 13.6 billion in joint ventures in addition to the USD 20 billion in loan agreements that were made soon after the visit of President Xi Jinping in 2016.

After a long gap, China responded to another request made by Bangladesh aimed at widening trade facilities.  Bangladesh can export 8,256 products to China from July under tariff-free contract. The World Trade Organization (WTO) has set a lot of guidelines related to trade facilities given to least developed countries.  Against the backdrop of rules and regulations set by WTO earlier, many countries are now struggling to avail the facilities. Vietnam, Cambodia and Bangladesh are among others from the least developed countries who have been trying to get duty and quota-free entrance to many countries.

With a huge trade deficit, Bangladesh never reaches the goals to be middle-income countries one. So, finding no other alternatives, the country is in process of talking with many countries having a high demand for Bangladeshi products. Already, the talks with long-lasting trading partners had been finalized. Now, there come many business-related opportunities before Bangladesh. It is high time to grab the much-needed opportunities for greater interest in our economy. Our foreign ministry began to talk with many countries aiming to push Bangladesh-made products as part of economic diplomacy. As a result of long waiting after sending a proposal to China, the success came all on a sudden.

What will be the fate of Bangladesh economy after LDC graduation cannot be predicted? But, considering the possible trade-related problems, Bangladesh has to take strategic programs right now. Vietnam and Cambodia have already started moving around the world to take up business facilities. To keep pace with them (our competitors), the need for arranging non-stop business dialogues is a must.  Coronavirus-ravaged economy needs huge attention given from developed nations. Otherwise, the economy with trade gap might face a hurdle to move ahead.

Tariff Commission of state council of ministry of finance of the people’s  Republic of China recently issued a notice on granting zero treatment to 97% of tariff products of Bangladesh. Bangladesh is lucky to have such permission letter approved by  China following our request in view of WTO directives.  Under the approval, around 5,161 Bangladeshi products will be allowed in China on the basis of duty-free and quota-free (DFQF) scheme. The benefit was given by China to Bangladesh as a least developed country (LDC) under the World Trade Organization provisions. This facility is in addition to preferential duties that we are already enjoying from China under Asia -Pacific Trade Agreement (APTA). So, from next July, a total of 8,256 products will enjoy duty-free facilities in the Chinese market.  These long-desired facilities are set to minimize the trade gap between Bangladesh and China.  Being a least developed country, Bangladesh never saw trade balance after so many years of independence. In 2017-18 fiscal year, a total of US$ 17000 million was recorded as the trade deficit with one hundred countries.

It is important to note that China every year imports products worth US$ 2 trillion from various countries of the world. Bangladesh so far could not expand export to China due to tariff-related problems. Only the products worth US$ 200 to US$ 300 crore was exported therefrom Bangladesh resulting in the huge trade gap.  China is the largest trade partner for Bangladesh with annual bilateral trade totalling over $ 13 billion. In the fiscal year 2018-19, Bangladesh imported goods worth $12 billion from China and exported goods less than $1 billion. Export to China from Bangladesh did not get momentum over the decades due to high tariff rate. Bangladesh exported products to China worth $ 791 million in FY 15, $ 808.1 million in FY 16, $ 949.4 million in FY17, $650 million in FY18, $831.2 million in FY 19 and $ 531.8 ( approximately)  million in FY20.

China – a country with around US$ 9.2 trillion nominal GDP-had been dominating the world through expanding export. Mainly least-developed countries are its trading partners. China came in focus within a brief time for producing the electronic products that are being made marketing worldwide on condition of reasonable prices. Bangladesh is no exception in respect of importing Chinese products. Bangladesh tried its best to enter into Chinese markets with Bangladesh-made products. But, excess duty was the main barrier. Chinese tariffs are very high compared with those of the EU and the USA- the two main export destinations for Bangladesh.  The average tariff to the EU and USA is 12 percent and 15.62 percent. On the contrary, exporters face tariff rates 25 percent to 30 percent in China.

On the contrary, Bangladesh has recently finalized a bilateral free-trade agreement (FTA) deal with Bhutan which comes into effect soon. Under maiden FTA, that is to be signed shortly, two South Asian countries are likely to experience economic activities. Dhaka – Thimphu trade relations are not remarkable. FTA deal held recently would help the two nations to expand trade activities to a great extent. Currently, 19 Bhutanese products are enjoying duty-free access to Bangladeshi market. In a high-level meeting held in 2018, Bhutan requested Bangladesh to approve 16 products more for duty-free access in the country. As Bhutan is not a World Trade Organization (WTO) member, Bangladesh as a WTO member can’t extend facilities placed by Bhutan side.

Under the deal, that will be signed by 30 August-2020, some 100 Bangladeshi products will enjoy duty-free access to the Bhutanese market. On the other, some 34 Bhutanese will also enjoy duty-free access to Bangladesh market. The volume of bilateral trade between the two countries stood at US$ 57.90 million in the fiscal year 2018-19. It was only US$ 26.52 million in the FY 2012-13.  Apparels, food items, plastics, pharmaceuticals, furniture, electrical products would be exported to Bhutan. Bangladesh will import chemicals, pulps, bolder stones, fruits, vegetables from Bhutan.

Actually, China – Bangladesh bilateral relations started moving fast when Chinese President Xi Jinping came to Bangladesh in October 2016. So, the year -2016 has been significant one toussince XiJinpingalways showed a positive approach to stand by Bangladesh in any situation while visiting Dhaka. His two- day historic state visit indicated that China would remain beside Bangladesh as “all-weather friendship”. During his visit, he signed in more than two dozens of deals amounting 2 thousand 53 crore US dollars for infrastructure development.

Land-locked Bhutan is the first country to recognize Bangladesh as an independent country on 06 December 1971, while China only after the 1975 assassination of Bangabandhu Sheikh Mujibur Rahman. So, Bangladesh has many responsibilities to promote Bhutan through any kind of assistance. If economic corridors among India, Bangladesh, Bhutan and Nepal are built soon, there is a huge possibility to expand economic activities. Besides, road communication between Bangladesh and Bhutan needs to be constructed aiming to enhance bilateral trade.

What should be noted here that free trade agreement with Nepal and Indonesia is already effective? Besides, talks with Thailand and Malaysia are in the process of tariff-free trading.

Bangladesh has to go forward now by strengthening its economic diplomacy with other countries.


The writer is an analyst of economic affairs, he can be reached by Email: [email protected]