Tuesday | 20 May 2025 | Reg No- 06
Bangla
   
Bangla | Tuesday | 20 May 2025 | Epaper

Detailed analysis needed for BD-China FTA

Published : Wednesday, 21 August, 2024 at 12:00 AM  Count : 628
Ferdaus Ara Begum
China is the largest trading partners of Bangladesh of about 150 countries with whom Bangladesh is maintaining contracts. With imports of a significant amount of raw materials from China, this share has been increased from 10.2% of 2002 to about 26.4% in the current year. Imported raw materials from China are being used in our export and other industries. Not only raw materials we also import technology, equipment from China. It is because of proximity and price competitiveness, the country has emerged as one of the central trading partners for Bangladesh.

There was a discussion on Bangladesh-China Free Trade Agreement (FTA) for long, however the analytical exercise and required research to understand the potential benefits and risks are yet to be recognized clearly. China is one of the biggest countries having huge manufacturing base and export of China was $ 3.4 Tr in 2023, comparing this Bangladesh is a very small country, even though 2nd largest apparel exporters, however, differences of export of apparel of China and Bangladesh is huge. China's apparel export is USD165 billion, while Bangladesh's export is only close to USD 40 billion in the recent year.

China is having 22 FTAs in total involving 29 countries and regional blocs (including ASEAN, comprising 10 nations). A further 10 FTAs are currently under negotiation, while 8 more are under consideration. The China-ASEAN FTA eliminates import-export tariffs and other barriers on some 90 percent of all products traded between China and the ASEAN member states. The signing of the China-ASEAN FTA, followed by the RCEP agreement, would have a significant impact on China and Asia's' development in global sourcing and the foreign investment.

Bangladesh exported $952 million worth of goods to China in 2022. The top exporting products are jute yarn, raw hides, knit sweaters, processed hair, leather footwear, raw aluminum, non-knit women's coat etc. China has extended duty free quota free market access to China for 98% products; however export has not been increased recently rather decreased. In the next consecutive years, export from Bangladesh to China decreased further after COVID because of a number conditional obligation. However, PET Flakes is another product exported to China, which was closed for some time, increased recently. It is apparent that export from Bangladesh dominates primary raw materials whichif it can be used for value added products having investment from China could contribute to increasing export.

Bilateral trade between these two countries is heavily dependent on China, it is also true that industries of Bangladesh are mostly benefitted for importing primary and intermediate raw materials from China. There were several discussions of signing a Free Trade agreement with China since last few years, revenue forgone is one of the apprehensions and tradeoff between trade expansion and revenue loss is a big question.

Some believes that Chinas interest in FTA with Bangladesh could be considered as a great opportunity and can be explored with evidence -based analysis and move ahead through learning by doing. The geo-political environment is another aspect needs to be analyzed in due courses.

Now a days, there is an unprecedented surge in FTAs among economically important countries of Asia as a part of efforts to deepen Asian regionalism by centering on sophisticated regional production networks. South-South (S-S) agreements driven by economic giants-the People's Republic of China (PRC) and India-are dominating Asian FTAs, amidst a recent outbreak of Japan-led North-South (N-S) agreements. Japan so far signed21FTAs and some are in process while there are a number of EPA of Japan in process including one with Bangladesh.

Common an apprehension is increase of import from China because of reduced duty, however cheap import can also contribute to increase export, some studies suggest only 1% increase in import can increase 26% increase in export. Bangladesh RMG is not possible to export to China rather complimentary provision for investment from China to Bangladesh, especially in the export-oriented industries can create comparative advantage. Trade policy needs to craft very carefully taking care of the win-win situation of both the parties with careful and detailed analysis. In the trade policy analysis, it is seen that Bangladesh is an outlier where tariff works as a principal instruments of revenue generation. Bangladesh of course need to think it differently at the stage of post LDC regime where tariff and Para tariff will face a number of challenges when FTA , RTA and EPA will be the options to be competitive.

The writer is Chief Executive Officer, Business Initiative Leading Development (BUILD)



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