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The new commerce minister has assumed office with a lot of challenges, both internal and external. Although he has an advantage in terms of continuation of the Awami League government, it is not going to allow him or his ministry easy ride. As trade friction across the globe is intensifying and Bangladesh is advancing towards the final phase of graduation from the Least Developed Country (LDC) status, it is critical to set the future course of action in keeping with the needs. The ministry of commerce has a very important role to play, and so the new commerce minister may think of redefining the roles and functions of the ministry accordingly. They have to set some broad agendas to support sustainable development of the country.
The first broad agenda for the commerce ministry may be the revision of the country's trade policy. The commerce ministry alone can not do this, but it should take the lead role to initiate the process without any delay. A crucial part of trade policy is the tariff regime -- one of the highest in the world. According to the World Trade Organisation (WTO), average MFN (most favoured nation) applied tariff and effectively applied tariff rates in Bangladesh are 13.90 per cent and 12.86 per cent respectively. The rates are higher than the averages for the Asia and Pacific economies where the rates are 7.46 per cent and 6.91 per cent respectively. Average MFN bound tariff rate is 155.68 per cent which is also higher than the Asia-Pacific average of 26.35 per cent.
Higher import tariff due to higher supplementary and regulatory duties makes import costlier and consumers pay more. The common logic in favour of higher import tariff is protection of local industries. But protection must not continue for indefinite period and local industries need to be competitive after a certain period of time. Protection in the form of higher tariff has to be reduced.
Higher and complex tariff structure is the main reason for the country's failure to enter into any bilateral free trade deal. But Free Trade Agreement (FTA) will be necessary in near future as Bangladesh will no more enjoy any tariff concession or preferential market access once the graduation from LDC status will be completed. Moreover, only bilateral FTA will no longer help remain competitive in the markets of trading partners. Trade in services and investments now have become essential components of any FTA deal and some countries are trying to negotiate comprehensive economic partnership deals.
Against this backdrop, trade policy of Bangladesh needs to be revised and adjusted in this line. The new commerce minister and his team need to work with other policymakers and stakeholders and convey the message that it is no more possible to design the country's trade policy from LDC perspective. The WTO is scheduled to review the trade policy of Bangladesh in April this year. It will be the last such review of Bangladesh as an LDC, and trading partners will try to gauge the future direction of Bangladesh's trade strategy. This is a big challenge and also an opportunity for the country.
Reforming and strengthening the relevant trade-related bodies and institutions may be the second broad agenda for the new commerce minister. A number of organisations are functioning under the commerce ministry. But many of them are not performing adequately due to lack of competent human resource and required cooperation from others. For instance, Bangladesh Tariff Commission is responsible for analysing and suggesting tariff structure, reviewing unfair international trade practices and prescribing remedial measures to protect local industries. This organisation is also assigned to provide inputs for bilateral, regional and multilateral trade negotiations. Over the years, although this organisation has improved its capacity, there still exists a lot of shortcomings which need to be addressed. Now there is a move to restructure the Commission renaming it Bangladesh Trade and Tariff Commission (BTTC). Commerce ministry may expedite the process and provide adequate support so that the body can function efficiently with its revised mandate.
Again, bodies like Trading Corporation of Bangladesh (TCB) and Office of Chief Controller of Imports and Exports need drastic reform. The effectiveness and necessity of these agencies need to be examined carefully.
Agenda setting needs some fast and hectic exercise in consultation with all the stakeholders. Country's trade promotion organisations and think-tanks also have some responsibilities to support the commerce ministry. A number of studies and set of suggestions are already there. So, it will not be a very difficult task.
The new commerce minister is, by profession, a businessman but active in politics for many years. He is also a former president of Bangladesh Garments Manufacturers and Exporters Association (BGMEA). Understandably, he has the advantage to understand the nitty-gritty of trade and business and take well-judged measures. During the first 100 days, his agenda setting exercise will indicate the future direction of the commerce ministry.