Message from the country's latest trade policy review in WTO

Asjadul Kibria | Published: April 12, 2019 21:45:54 | Updated: April 13, 2019 14:39:15

The fifth trade policy review of Bangladesh was carried out in the first week of this month at the secretariat of the World Trade Organisation (WTO) in Geneva.  This is a mandated exercise in the WTO agreements to examine and evaluate the member countries' trade and related policies and practices at regular intervals. The core idea is to make trade policies of WTO members transparent and predictable as far as possible.

The previous review took place in 2012. Thus all trade related developments along with overall economic activities during 2012 and 2018 came under the just concluded review. There is no doubt that it bears some implications for the future direction of the country's trade regime. Commerce minister Tipu Munshi, who led the 16-member delegation of Bangladesh in the meeting, claimed it a 'wonderful meeting'. His claim is based on the WTO members' appreciation of the economic advancement of the country as well as commencement of some regulatory reforms to cut trade costs.

It is true that WTO members appreciated Bangladesh for the robust growth of Gross Domestic Product (GDP) over the decade which has contributed significantly in reducing poverty and improving various social indicators. Persistent growth also helped to cross the World Bank's threshold for lower-middle-income countries in 2015 and to keep the country on track to graduate from Least Developed Country (LDC) status by 2024. They also praised Bangladesh for implementing several policies including National Industrial Policy 2016, Export Policy 2018-21 and also efforts in areas of regulatory reform, taxation and improving business environment and promoting trade facilitation.

While appreciating the remarkable progress, the WTO members also stressed the continuation of necessary reforms to diversify the economy and enhance competitiveness of its industries, as well as improve its business environment and fiscal conditions. Concluding remarks, made by the chairperson of the Trade Policy Review Body (TPRB), reflected both appreciation and concern about the challenges pertaining to Bangladesh's trade policy.  

In its last trade policy review as a LDC, Bangladesh received more than 150 questions in advance from different members. It is not surprising that a large number of questions were posed to know the possible strategies and preparations to overcome the post-graduation challenges.  By putting such questions, the other WTO members tried to get an idea about the country's future trade policy course. 

Bangladesh will continue to enjoy the current preferential trade treatment in the developed as well as some advanced developing countries till 2027.  After 2027, there will be no extension of these market access benefits. Bangladesh delegation acknowledged that the loss of Duty-Free Quota-Free (DFQF) market access and flexibilities provided by the WTO will pose enormous challenges for Bangladesh. Although the commerce minister sought extension of trade preferences for a few more years to support smooth graduation of the country, it is unlikely to happen. But the country needs to push it as a strategic step to keep pressure on WTO members. Moreover, the demand is not only for the benefit of Bangladesh, but also for all the LDCs.  The demand placed in the meeting actually opened a window of negotiation in this regard. In fact, United Nations General Assembly Resolution 59/209 called for 'the smooth transition strategy for countries graduating from the list of least developed countries'. The commerce minister referred to the resolution in the meeting and requested the WTO members to take actions in line with the resolution.

Some trade partners stressed that Bangladesh should gradually narrow down its subsidy regime which is still not very high or entirely trade distortive. The Bangladesh delegation replied that the government provides minimal domestic supports to agriculture and fisheries and all are green-box in nature. But subsidies and incentives to enhance export is a tricky thing and will be definitely come under closer scrutiny in post-LDC era. Thus the country needs to take some long-term steps to streamline the existing practice of providing subsidies. 

Worker safety is another area which drew the attention of some trading partners. After Rana Plaza disaster that claimed more than 1,100 lives, the export-oriented readymade garment factories have gone through a big structural change. But worker's safety and working conditions are still a big challenge and need to further work on.

The trade policy review meeting also brought an opportunity to project Bangladesh as an investment destination.  There were questions on national treatment of foreign investors in Bangladesh and different reform measures. Commerce minister replied that the country's tax policy does not discriminate between foreign and domestic firms. Moreover, the Foreign Private Investment (Promotion and Protection) Act, 1980 ensures fair and equitable treatment to foreign private investment. Moreover, profit repatriation process is easy. He also mentioned that portfolio investment or short-term investment in the capital market is open for foreign investors and may be relaxed further, if necessary. Different measures taken to facilitate trade and investment were also mentioned in the meeting.

Questions on tariff policy and suggestions to bring down tariff rates were also there. Bangladesh delegation, however, mentioned that like all other LDCs, the country also considers tariff a source of revenue generation and trade policy tool.  Currently, over 95 per cent tariff lines of the country are ad valorem in nature, and so transparent. According to WTO estimate, the simple average applied MFN tariff stood at 14.80 per cent in FY19. But tariff protection varies substantially across and within sectors, averaging 18.1 per cent for agricultural products and 14.10 per cent for non-agricultural products now.

To understand the implications of the trade policy review, more time is needed as WTO will release the meeting minutes and questions and answers by the end of May this year. Nevertheless, initial takes are now clear. In a nutshell, these are: enhancing capacity to cope up with challenges in post-LDC period is critical; further liberalisation of tariff regime is under watch; and widening the path of increased foreign investment is largely on track.


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