EDEN BUILDING TO STOCK EXCHANGE Published: 12:24 AM, 17 February 2019
https://dailyasianage.com/news/163882/bangladeshs-simultaneous-fta-with-china-and-india
Bangladesh's simultaneous FTA with China and India M S Siddiqui
Bangladesh is yet to sign a bilateral free trade agreement but few regional and sub-regional trade agreements (RTAs). The regional agreements include Preferential Trade Agreements (PTAs) namely: (1) Asia-Pacific Trade Agreement (APTA); (2) Trade Preferential System among OIC Countries (TPS-OIC); (3) Preferential Trade Agreement among D-8 Member States (D-8); (4) preferential Trade Agreement between Bangladesh and Iran; and (5) Agreement on SAARC Preferential Trading arrangement (SAPTA). It has also signed Free Trade Agreements (FTA): (i) South Asian Free Trade Area (SAFTA) and (ii) Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC-EC). Among the FTAs mentioned above, SAFTA is in fully operational while the BIMSTEC is yet to be functional. The Asia-Pacific Trade Agreement (APTA), previously named the Bangkok Agreement, signed in 1975 as an initiative of ESCAP. Bangladesh, China, India, Lao PDR, Mongolia, Republic of Korea,
and Sri Lanka are the parties to the APTA. ESCAP functions as the secretariat for the Agreement. APTA is a preferential tariff arrangement that aims at promoting intra-regional trade through exchange of mutually agreed concessions by member countries. The following three Framework Agreements under APTA have been signed and ratified by the Participating States: (i) Agreement on Trade facilitation, (ii) Agreement on investment and (iii) Agreement on Liberalization of Trade in Services. Successful implementation of the latter agreement can play a vital role in investment flows, not only from non-member countries but also among the member countries. APTA was signed with the aim to promote intra-regional trade through an exchange of mutually-agreed-upon concessions. Its membership is open to developing countries that belong to ESCAP. ESCAP is the regional development arm of the United Nations for the Asia-Pacific region. It has 53 Member States and 9 Associate Members, with a geographical scope that stretches from Turkey in the west to the Pacific island nation of Kiribati in the east, and from the Russian Federation in the north to New Zealand in the south, the region is home to 4.1 billion people, or two thirds of the world's population. With the entry of China in 2001 made APTA the only RTA linking the two fastest-growing economies of the world China and India. One of the most distinguished gains for Bangladesh is to get access to the two most populous and fastest growing countries in the region and also to opportunities to trade in major world markets, such as the Republic of Korea, and in newly developing markets in South Asia, such as well as Sri Lanka. Bangladesh enjoying some benefit of since the rules of origin criteria of APTA are:(1) In case of single country content, value addition requirement is 35% for LDCs and 45% for non-LDCs, and (2) In case of regional accumulation, local content requirement in 50% for LDCs and 60% for nonLDCs. Bangladesh is mainly importing products, including intermediate goods, basic raw materials, capital goods and machinery, and industrial parts. Bangladesh has offered duty benefit on import of 602 products from five countries. Bangladesh for the first time offered the duty benefit on import of 602 products from five countries under APTA. The SRO has been issued with a retrospective effect from July 1, 2018. India will provide tariff concession on 3,142 products to the APTA member states including Bangladesh. Also, China in general slashed duty on 2,191 products, South Korea on 2,797, Sri Lanka on 598 and Laos on 999 products. Besides, India waived tariff on 48 products, China on 181 products, and Sri Lanka on 75 products for both Bangladesh and Laos. Meanwhile, South Korea has cut duty up to 100 per cent on 951 products for Bangladesh. Bangladesh is now requesting China for more duty free and quota free (DFQF) excess of more products and decided to avail such a facility by discarding the benefits it enjoys in the Chinese market under the APTA while it is likely to graduate to the developing country status by 2024, There is scope for enjoying the facility for only five more years. There is no reason of drop the facilities enjoyed under AFTA and rather should pursue a complete FTA of APTA to gain the benefits of duty import of raw materials and duty free export of finish products to member countries. China and India constitute for around 50 per cent of annual import of Bangladesh. Bangladesh import from APTA member countries is about 20 billion and export to APTA is very low.
The benefit will affect the government's revenue earning to some extent. Out of its total US$ 51.50 billion import, Bangladesh brought goods worth around $ 16 billion from China and Hong Kong and $ 9.0 billion from India in last fiscal year (FY), 2017-18. In 2018, Export to India is US$870m and export earnings from China are US$$695m. Our Major Export destinations are EU, USA, Canada, Japan etc. China and India are the source of major raw materials for our exportable items including garments. We need support from APTA to develop our export competitiveness in the APTA region. The competitiveness of export products can ensure with elimination of customs duty on imported raw materials from China and India and also customs duty on Bangladesh export to China and Indian market. Bangladesh can increase export volume with no import duty on Bangladesh products through FTA in these two markets. Bangladesh may get rid of different trade barrier in Indian market only by signing FTA. Unfortunately, The signing of the much needed free trade agreements (FTAs) with the important trading partners is still far away as authority has fear of losing 'income' from customs duty and safeguard some import substitute industries. Bangladesh will have to be ready and continue lobbying with the major trading partners for the FTAs as the DFQF market will no longer available after the graduation to developing country. The United Nations Conference on Trade and Development estimated that exports may fall by 5.5 percent to 7.5 percent after the graduation. The country should not only try to sign FTAs, but also lobby with major countries and trade blocs for signing the Comprehensive Economic Partnership Agreement which include trade, tourism and investment. Successful implementation of FTA can play a vital role in investment flows, not only from non-member countries but also among the member countries. Global experience proved that bilateral FTAs have been becoming instrumental in the global trading system. There are more than 200 such deals worldwide. Bangladesh has negotiation of bilateral FTA with many countries but could not sign any such agreement. Bangladesh could sign some regional and intra-regional PTA and FTA very successfully and should try to get benefit under those PTAs and FTAs. The negotiation of APTA was under sponsorship of The United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) and seems successful from point of view of Bangladesh as we are not efficient in negotiation of bilateral and multilateral PTA or FTA. We can expect FDI from Chinese and Indian investment for bye back of finished products to their market as well as export to global market as Bangladesh still have duty free and quota free excess to some major markets. Vietnam is the beneficiary of The Trans-Pacific Partnership (TPP) as FDI from China and India is huge targeting two biggest market of USA and Australia and other market although USA has withdrawn from TPP. Bangladesh also needs a balance of trade with these two countries simultaneously due to geopolitical reason. APTA is the only forum to bring these two countries together in a single forum of PTA with Bangladesh. But Bangladesh urgentlyshould promote APTA and also need FTA with both China and India. The writer is a legal economist. Email: mssiddiqui2035@gmail.com