RCEP membership to advance business interests

Bangladesh's eagerness to join the Regional Comprehensive Economic Partnership (RCEP), as reported in the media, has come up on a positive note in terms of boosting exports to the Asia-Pacific region. However, benefiting from such a mega regional bloc depends largely on some bold moves that Bangladesh is required to take, even at the expense of its import revenue at the beginning.

The RCEP is recognisably the world's largest regional trading bloc accounting for about 30 per cent of global GDP and about a third of the world population. The members include 15 Asia-Pacific countries, including among others Indonesia, Malaysia, Singapore, Thailand, Australia, China, Japan, New Zealand and Korea. The bloc 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. Bangladesh's trade with the bloc is notable for the huge volume of imports from and a paltry export to the member countries. In the fiscal year 2020-21, Bangladesh' merchandise export to the RCEP member countries stood at $3.9 billion, as against import of $24.5 billion worth of goods. Services export during the period stood at $1.8 billion and import $2.6 billion.

The Bangladesh commerce ministry reportedly is set to send a formal proposal to the RCEP secretariat for the country's membership by September this year. The decision to join the forum is basically meant to avert post-graduation challenges such as erosion of duty preference on Bangladesh's exports, especially garments, from some preference-giving countries which are members of the bloc. Currently, Bangladesh is a beneficiary of preferential duty benefits from China, Japan, Australia and New Zealand. The country will continue to receive the benefits until 2026, the year of its LDC graduation. This means, if Bangladesh does not join the RCEP or sign free-trade agreement with these countries by 2026, it will lose its competitive edge in its export markets, especially in China and Japan. This, to be precise, explains the need for Bangladesh's eagerness for membership of the RECP.

Import from RCEP contributes around 43.92 per cent of the total global imports by Bangladesh, and 58.56 per cent of total revenue from customs duty as of FY 2020-21. Thus, accession of Bangladesh to the RCEP and eventual lowering of customs tariff while signing FTA may have a negative impact on customs revenue. Since some major import sources of Bangladesh like China, Japan, Thailand, Korea, Indonesia, Malaysia, Australia and New Zealand are RCEP members, the threat of losing sizable revenue while importing from these countries at reduced duties cannot be overruled. A study conducted by the Bangladesh Trade and Tariff Commission on the subject, however, mentioned that despite lowering customs tariffs, higher trade may generate additional revenues. Experts are of the opinion that there has to be a thorough calculation on possible gains for Bangladesh vis-à-vis the gains of the member countries in return from Bangladesh. On the basis of a comprehensive assessment the authorities concerned will be better equipped to devise appropriate plans.