10 months ago

Bangladesh’s joining RCEP almost certain

Formal proposal on membership of the mega trade bloc by Sept likely

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Bangladesh has decided in principle to join emerging vast trade-bloc styled Regional Comprehensive Economic Partnership (RCEP) on hope of boosting exports to the member-countries, sources said.

The Ministry of Commerce (MoC) is expected to send by September a formal proposal to the depository and temporary secretariat of the world's largest trade bloc at the ASEAN headquarters for the country's membership, they added.

It has already completed necessary scrutiny and review in this regard based on commitments fulfilled by Vietnam, a member of the trade bloc.

The decision to join the forum emerged from a workshop on the issue in Dhaka on Tuesday, with senior commerce secretary Tapan Kanti Ghosh in the chair.

Participants in the workshop expressed their opinion in favour of signing a free-trade agreement (FTA) with the RCEP members with an eye to facing post-graduation challenges.

They viewed that the commercial and strategic importance of Bangladesh will get a boost in regional and international environment if Bangladesh joins the bloc.

Contacted, Additional Secretary (FTA) Noor Md. Mahbubul Haq said: "The participants are in favour of sending a formal proposal to join the bloc. However, we'll have to take some precautionary measures in this regard."

He said the MOC would have to collect different information, including application format, before sending the formal proposal.

A study conducted last year by Bangladesh Trade and Tariff Commission (BTTC) showed Bangladesh's trade with RCEP- member countries mostly concentrated on trade in goods.

Bangladesh's export may grow 17 per cent and gross domestic product (GDP) 0.26 per cent if free-trade agreement is signed with the bloc members, it mentioned.

The RCEP deal, which came into force in January 2022, is considered a high-quality, modern and comprehensive FTA beholding 10 member-states of the Association of Southeast Asian Nations (ASEAN) and its five FTA partners.

The ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, while its FTA partners are Australia, China, Japan, New Zealand and Korea.

An outstanding feature of the RCEP is that it represents the world's largest FTA, comprising about 30 per cent of global GDP and about a third of the world population.

The economic-cooperation forum, spanning Asia-Pacific realm that covers 2.3 billion people, accounts for US$ 25.8 trillion or about 30 per cent of global GDP.

Also, it accounts for $12.7 trillion or over a quarter of global trade in goods and services, and 31 per cent of global foreign direct investment (FDI) inflows.

In the fiscal year (FY) 2020-21, Bangladesh exported goods worth $3.9 billion and imported goods worth $24.5 billion. On the other hand, at the same time, the services export was $1.8 billion and import was worth $2.6 billion.

Bangladesh enjoys preferential market access to many of the RCEP countries, either through preferential trade agreement (PTA) or through GSP facilities.

After graduating from the least-developed country (LDC) status in 2026, the duty-free access will no longer be available except for reciprocal general preference under the Asia-Pacific Trade Agreement (APTA).

In such a situation, sustaining the consistent progress achieved by Bangladesh in bilateral export trade with some of the RCEP countries as well as availing the opportunity to some potential destinations in RCEP will be a real challenge.

The study says RCEP includes some of the major export destinations as well as major import sources of Bangladesh. "Considering the bilateral-trade scenario, RCEP remains more as an important partner from the Bangladesh perspective."

Import from RCEP contributes around 43.92 per cent of the total global imports by Bangladesh, 55.33 per cent of the total tax- revenue and 58.56 per cent of total revenue from customs duty collected under home consumption, as of FY 2020-21.

Thus, the probable accession of Bangladesh to RCEP may, however, have a negative impact on revenue generation from customs duty.

Since some major import sources of Bangladesh like China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved with RCEP, there is a threat of losing a certain amount of revenue from these countries.

More than 68 per cent of total merchandise exports to RCEP are under apparel-product category.

Top twenty export items to RCEP mostly consist of apparel products and these twenty products constitute 64 per cent of total exportable.

The study found that the average most-favoured nation (MFN) tariffs for Bangladesh have been comparatively higher than that of the RCEP members.

It says the probable increase in import along with a comparatively protective regime of Bangladesh estimated a probable high revenue loss for Bangladesh compared to that of the RCEP.

"However, as estimated trade creation would likely be higher than the trade-diversion effect for Bangladesh, it may generate additional revenue from other duties and charges, if not reduced due to a possible accession in RCEP," the study mentions.

The Trade and Tariff Commission recommends that the government may express its positive stand regarding the accession of Bangladesh to RCEP through weighing all the pros and cons. In that case, domestic rules and regulations may need to be changed in some cases, if a situation arises.

An expert says the country needs to be creative due to the signing of FTAs. "Tariff policy and education-sector policy reforms are needed immediately," he points out and says capable human resources need to be groomed.

The RCEP negotiations were formally launched during the 2012 ASEAN Summit in Cambodia.

India withdrew from the agreement in November 2019 despite participation from the beginning of negotiations.

Contacted for an analytical view, Distinguished Fellow of the Centre for Policy Dialogue (CPD) Prof Mustafizur Rahman said obviously it would be a great opportunity for Bangladesh if it joins the RCEP bloc. After availing membership, Bangladesh will get preferential market facility from the member-states.

"Bangladesh will have to be prepared for opening its market to the RCEP-member countries in return for getting such preferential market facility from them," he says.

The economist believes capacity building is very important. "Different necessary moves have to be taken for strengthening supply side and product quality in domestic entrepreneurs/institutions and foreign-investor levels."

Mr. Rahman also suggests for the government to take multiple tasks for export diversification if it wants more earnings from the regional bloc.

The workshop decided that the government take initiatives for strengthening capacity building of different agencies, an official said.

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