The federal government has finalised a draft of a preferential trade agreement (PTA) to be signed between Bangladesh and Bhutan next month.
The commerce ministry will place the ultimate draft of the proposed agreement at the cabinet meeting, to be held tomorrow, for final approval, Commerce Secretary Jafar Uddin told The Daily Star over phone yesterday.
If the deal undergoes, it could be the 1st formal PTA for Bangladesh with any country.
The signing of the PTA with Bhutan indicates that Bangladesh is pro-active in trade negotiation, said MA Razzaque, research director of the Policy Research Institute (PRI).
The signing of PTA with Bhutan has dual significance, including a historical legacy, as both customers of the South Asian Association for Regional Cooperation (Saarc) have trade links between your two, he said.
In June, the ministry directed the conditions and conditions of the PTA to regulations ministry for vetting.
"With the cabinet's go-ahead, we can sign the offer anytime time soon, preferably within per month after the completion of most formalities," the commerce secretary as well explained. Commerce ministers of both nations will to remain behalf of their respective countries.
Under PTAs, some select goods enjoy duty benefits whereas under free trade agreements or FTAs, virtually all do.
The rapid upsurge in PTAs has been a prominent feature of international trade policy recently.
PTAs constitute a great exception to the overall most-favoured nation (MFN) provision of the Community Trade Organisation (WTO), where all WTO customers impose on one another the equal non-discriminatory tariff.
All WTO users, sans Mongolia, possess signed at least one PTA. The curiosity in negotiating PTAs seems to have sustained despite the global economical crisis, the WTO as well said.
Bhutan decided to provide duty benefits on the export of 100 different Bangladeshi goods, including garments, processed agricultural goods and electronics.
On the other hand, 34 Bhutanese goods, including fruits, will love the same benefit in Bangladesh.
Being customers of Saarc, trade among Bangladesh and Bhutan is normally increasing as both countries possess demand for each other's products.
Trade between Bangladesh and Bhutan, which amounted to $26.52 million in fiscal 2012-13, reached $57.90 million in fiscal 2018-19, regarding to data from the commerce ministry.
Presently Bangladesh has been negotiating with few other countries to finalise FTAs in order to enjoy duty totally free benefits even following its graduation from minimal developed country (LDC) category, Uddin said.
For instance, a joint research is going to sign the proposed Comprehensive Economic Partnership Agreement (CEPA) between Bangladesh and India.
Bangladesh needs to signal a CEPA with some countries as only signing the PTAs or FTAs won't work, he added.
The CEPA is a thorough partnership between your two countries, which also includes investment, whereas the PTAs and FTAs cover tariff issues.
Hence, the signing of a CEPA between Bangladesh and India can ensure considerably more trade and expenditure between your two neighbours, he said.
"However, we are able to say in details about the CEPA after the completion of the joint study, which is certainly going on between your two countries," Uddin as well said.
Bangladesh will have to sign different trade pacts just like FTAs, PTAs and CEPA with the potential trading countries or perhaps trading blocs for enjoying the trade benefits following its graduation to a developing country.
"We must be active on signing the FTAs and PTAs for our own interest. This is a good signal that people are pro-active about PTA and FTA," Razzaque of PRI said.
Bangladesh should also signal FTAs with the essential trading partners or trading blocs want ASEAN and EU to ensure that the country is greatly benefited after its graduation, which might eradicate the guaranteed duty privileges for the united states, he said.
For instance, Bangladesh can start negotiation with the Association of Southern East Asian Countries (ASEAN) so that the country can grab more marketplace show within the Asian region, he said.
If it is extremely hard to enter the league of ASEAN, the signing of FTA with an individual person in the ASEAN can even be highly beneficial for Bangladesh, he said.
For example, if an FTA can be signed with Malaysia or Indonesia, Bangladesh can enjoy greater duty benefit of the ASEAN through its member region, he said. "On the other hand, we have to figure out whether we will be ready to open up our economy or certainly not through the signing of the FTAs or CEPA or PTA."
Currently, Bangladesh has no FTA with the country although the federal government is definitely trying to sign such deals.
According to the country's previous financial development data, the UN Committee for Development Coverage (UN CDP) is scheduled to complete the ultimate round of evaluation of Bangladesh's LDC graduation in 2021.
If the UN CDP finds Bangladesh's assessment great, the united states will graduate to a developing country in 2024.
Once the nation is graduated, all the tariff benefits will be lifted for the county. Only, the EU allows the tariff advantage to Bangladesh for another 3 years as a grace period.
That means, Bangladesh will love the zero-duty benefit to the EU until 2027, however in additional countries the tariff benefits will be withdrawn from 2024.
Currently, Bangladesh just as an LDC, enjoys zero-duty benefits, preferential trade benefits and regional trade benefits on the subject of exports to 38 countries, including 28 EU countries.
Also, in the USA, Bangladesh enjoys zero-duty benefit for 97 per cent of its products. But unfortunately, Bangladesh's key export items, including garment, aren't contained in the package.
Because of this, Bangladeshi exporters have to face 15.62 per cent duty on export of clothing items to US markets. Even so, the united states is the single major export destination for the country.
Bangladesh will deal with competition found in the EU industry after graduation while Vietnam has already signed a great FTA with europe.
Some 74 % of Bangladesh's export earnings come under preferential trade as an LDC. Of that percentage, 64 per cent comes from the EU and 10 % from Japan, Canada and different developed countries.
Bangladesh's export will decline by 5.7 per cent annually if the Everything but Arms (EBA) isn't extended and community exporters will need to face an 8.7 percent duty to the EU.
So, you will find a possibility of losing a lot more than $2 billion worthy of of export organization annually after graduation, according to UN human body.