FTA is an international agreement between two or more countries to reduce or remove trade barriers and bring closer economic integration. FTA offers lower or zero tariff (tariff concession) on exports and imports of goods and components assigned under FTA. This makes products more competitive, as compared to exports and imports from non-FTA partner countries.
Bangladesh has not, however, signed a single FTA so far. Signing of FTA is very much essential for the country. There were lots of discussions with many countries in the past about the issue, but FTA has remained elusive.
The first such agreement was supposed to be signed with Sri Lanka late last year. The government announced that the agreement with Sri Lanka would be signed soon as both the countries have already completed a joint feasibility study and examined its pros and cons. Unfortunately, it has not yet materialised. Once the deal is signed, a joint working committee would be formed with Sri Lanka engaging garment exporters of both countries to produce value-added apparel items for exports to European markets. The formation of the committee is still at the very initial stage.
Sri Lanka is in an advantageous position in value added apparel industry, shipping lines and deep-sea port, financial services, Information and Communications Technology (ICT) and skilled technical people in different sectors. On the other hand, Bangladesh enjoys advantages in the apparel sector, skilled workforce in the garment sector, agricultural products, processed foods and migrant workers, Bangladesh would be immensely benefited if the FTA is signed with Sri Lanka, as a portion of its exports and imports of goods are done through the Colombo port.
Denying the government's inertia to sign FTAs, a commerce ministry official said that they are now looking for ways to sign preferential trade agreements with the trading partners. The preferential agreements are vital for Bangladesh to remain competitive in the international market. These will also help Bangladesh to continue getting the duty benefits after its graduation from the league of least developed countries (LDCs).
Signing of the FTAs with some countries is being delayed because every country looks after its own interests. For instance, Malaysia is interested to sign an FTA with Bangladesh, but the latter is not that much interested. If Malaysia gets duty-free market access through the process of FTA, it will go in its favour because the trade is already tilted towards the country governed by the Mahathir-led coalition.
Bangladesh exports $300 million-worth goods to Malaysia while the import figure has hit $2.0 billion. That is the reason for Bangladesh to go slow. After holding meetings for years, Bangladesh backtracked from signing an FTA with Malaysia at the final moment.
Bangladesh will have to be ready and continue lobbying with the major trading partners for FTAs as the erosion of preference will affect trade significantly after LDC graduation. The country should not only try to sign FTAs, but also lobby with major countries and trade blocs for signing the Comprehensive Economic Partnership Agreement which include trade, tourism and investment.
FTAs have now become instrumental in the global trading system as the prospects of multilateral trading systems under the World Trade Organisation (WTO) are decreasing gradually. There are more than 200 such deals worldwide. Why should Bangladesh lag behind?
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