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Today, the citizens of the United States (US) are going to elect the next president of the world's most powerful country and the event is quite significant for the rest of the world. Many analysts have already outlined what a victory of Donald Trump could mean for the global economy. Again, many have also suggested the expectations of the world from Kamala Harris as president.
There is no doubt that Trump, if elected, will adopt a restrictive trade policy and resume tariff war the China. Robert Lighthizer, the US trade representative in the Trump administration, in an article in FT on Friday made it clear. Nullifying the critics of Trump's popular tariff proposals who claimed the tariff hikes would be inflationary and harm the economy, Lighthizer said, "The fact that this never happened during Trump's first term, when we raised tariffs, is reason enough to be sceptical of such criticisms." The former USTR also mentioned, "Our trading partners, particularly those with large trade surpluses, shouldn't blame us for shifting policy. We would be merely responding to the harm they have caused."
If Kamala Harris is elected, her administration will continue the Biden trade policy with some moderate changes and there will be a little risk of tariff war with China and other trading partners. Nevertheless, as non-reciprocal trade deals like GSP and multilateral, regional arrangements have been excluded from the US trade agenda, it is clear that the US only prefers to make bilateral reciprocal trade deals.
Against the backdrop, what is the option for Bangladesh to enhance its trade with the US, the largest export destination of the country? In 2023, bilateral trade between two countries stood at $10.53 billion with trade balance significantly titled to Bangladesh as total exports to US stood at $8.28 billion.
Since the suspension of GSP benefit for Bangladesh in June 2013 in connection with the worker rights and work place safety issues, several attempts were made by Bangladesh for reinstating the trade benefit. It is to be noted that only around 1.0 per cent of Bangladeshi exportable items enjoyed GSP benefit in the USA in the form of tariff-free access. For instance, Bangladesh's total export to the US in 2012 was $4878.60 million of which only $34.60 million worth of shipments were under GSP scheme. The main items exported under GSP benefit were: plastic products, ceramic products, golf products and carpet products. Thus suspension of GSP had very little impact on Bangladesh's export to the US. There is, however, no chance to revive GSP.
So, Bangladesh should, without wasting time on GSP or WTO, immediately take up a proactive initiative in establishing a Strategic Trade and Investment Partnership (STIP) with the US following the example of Kenya and Morocco. The terms of STIP in goods, services and investment with US should be without prejudice to the rights and obligations under the WTO Agreements and respective international rights and obligations as agreed in Bangladesh-US TICFA.
I have been arguing for long, in fact since the suspension of GSP 11 years ago, that Bangladesh needs to move ahead to sign a bilateral FTA (BFTA) with the US. Though ambitious, it is not an impossible task. After Donald Trump got elected as the US president in 2016, the issue should have been taken up in right earnest. The Hasina government at that time did not move in the direction rather opted to a hostile relationship, especially after 2020.
Bangladesh has a longstanding demand for availing tariff-free market access in the US. The average tariff on Bangladeshi imports is 15.70 per cent. In 2023, the US customs collected $1.02 billion in customs duties against import of Bangladeshi goods worth $8.28 billion. Though the Hong Kong Ministerial Declaration of the WTO in 2005 provided a legitimate basis for Bangladesh's attaining zero-duty access in the US market, the US refuted it on the plea that it is not legally bound until the completion of Doha Round negotiation. Now the Doha Round is buried, it is clear that Bangladesh apparently has no hope to gain zero-duty market access in the US market under any multilateral or reciprocal trade deal. The option of BFTA is also getting more difficult as the BFTA with US deal is not confined to trade in goods and services only but covers investment, intellectual property right and standards of labour and environment. There are obligations beyond Trade Related Aspects of Intellectual Property Rights (TRIPS) of the WTO. In the latest TICFA meeting, the US side stressed on effective protection of IPR. There is also a requirement of investment protection.
Meantime, Kenya has been negotiating the STIP with the US and it is expected to end soon provided Kamala Harris becomes the next president. Winning of Trump may force renegotiation. Whatever may be the case, STIP is designed to increase investment; promote sustainable and inclusive economic growth, benefit workers, consumers, and businesses (including micro, small, and medium-sized enterprises), and support African regional economic integration.
Bangladesh needs to review the case of US-Kenya STIP deal and redesign its trade policy following the result of the US election. As the country is set to graduate from the Least Developed Country (LDC) status by 2026, enhancing trade cooperation with the US is critical-- be it in the form of BFTA or STIP.
Manzur Ahmed, Trade and Tariff Policy Adviser, FBCCI, 1980-2024.