Trade strategy needs to be reset  

Abu Ahmed   | Published: June 07, 2018 22:21:10


The road to globalisation through Doha Round seems to be coming to an end. Nobody now talks about the needs of Doha Round seriously. The World Trade Organisation (WTO) is being sidelined in talks related to trade and investment issues among the countries. In fact, nations of the world perhaps will not meet anytime soon to discuss and take decision on the issues of further liberalisation of global trade and investment. The important and big economies, especially that of the United States, are walking towards the opposite direction, erecting walls of tariffs against global free trade and adopting some kind of protectionism.

The term protectionism - meaning erecting tariff walls against the imports from other economies - was there in the past when the nations were at war with each other or remained divided on ideological grounds. But over the period of last two decades, especially after the end of the cold war, the world saw a surge in cooperation among nations towards boosting global trade and investment. One after another rounds of multinational trade and investment talks were held among the countries of the world towards freeing more global trade and investment.

At one stage, it seemed that the whole world would go for a duty-free, quota-free trade and investment regime. The world will have no restriction in allowing its goods and services flowing from one country to another or from one place to another. The nations will exist only as political units, but they will cooperate economically in an unhindered manner. More trade among the nations brings more income for the nations, and also boosts up the global growth in terms of income and employment.

In that case, the cost of production will be the sole factor in determining which country sells what to other country. The incomes of the people of the world will converge - that means people will grow together in income and a kind of convergence will be there in terms of people's income levels. With the globalisation of trade and investment, technology and production method will also be converging, irrespective of nations. The economics of comparative cost advantage will dictate which country or area will produce what.

Bangladesh also tremendously benefited from the WTO rules-based globalisation. Bangladesh for the first time believed that yes, it could also achieve success, rival other economies and reap benefit from export. There were surges in Bangladeshi exports as the whole world markets opened up before it. Bangladesh also got the confidence that it could achieve even more in export if a level-playing field in global trade is there.

With a high hope, Bangladesh looked towards the successful completion of multinational Doha trade and investment round. But the country lost much of that hope when it saw that the Doha Round was virtually abandoned by the world's mighty economies. The world, however, will not stand still as it has already got the taste of globalisation. Now, the countries are grouping themselves regionally and beyond the regions among the trade partners for indulging in more trades and investments.

Instead of globalisation, there will now be many regional groupings - a shorter version of globalisation, so to say. May be, this way out is the second best strategy before them to benefit from more trade and investment with cooperation among themselves. There is a huge surge in the proliferation of FTAs (Free Trade Agreements) among the nations. Most of the FTAs emerged in the wake of the deadlock in the Doha Round of negotiations. Bangladesh in this regard is lagging behind and has signed no FTA with any country.

Bangladesh calculated economies or diseconomies of FTAs in a way that put a fear in it that if it signs FTAs, imported goods from the exporting countries will harm its industries. Therefore, one kind of protectionist feeling was there among the Bangladeshi policymakers, which held them back from signing FTAs with intending partners. By taking an extraordinarily long time in signing FTAs or joining some free economic zones, Bangladesh is losing to its competing economies.

In the present circumstances, Bangladeshi exports may not increase the way they had done in the preceding decade.

If the present level of globalisation is thwarted by the big economies, Bangladesh's problems with its exports will simply be compounded. Already, Bangladesh is experiencing a lower export-GDP (gross domestic product) ratio. If it deepens, the country's balance of payments will further worsen. And in that case, the macroeconomic stability, which it till enjoys, will come under a threat.

Abu Ahmed is Professor of Economics, University of Dhaka. abuahmedecon@yahoo.com

 

Share if you like