Revamping China-Bangladesh Trade
It was expected that with the announcement of July 1, 2020 for more duty-free quota-free access of Bangladeshi products to the Chinese market, bilateral trade, especially export from Bangladesh will be revamped. That did not happen. Bangladesh has huge trade deficit with China.
Despite the fact that bilateral trade favours China heavily, Bangladesh has enormous potential that has yet to be realised. With the new extension of duty-free and quota-free access to China, we need to redouble our efforts with required administrative, regulatory and infrastructural support. According to the notice of Tariff Commission of the State Council of China on June 16, 2020, zero tariff is applicable to 8256 products originating from Bangladesh (among the total 8549 products). Of these, 5161 items are marked as " Beneficiary Country LDC", 2911 items marked as "Beneficiary country ILDI" and 184 items marked as " Beneficiary 2LD2". China has divided LDC countries in this way.
China imported goods worth $2.10 trillion in the first nine months of 2021 and exported $ 2.45 trillion during the same time. As the global economy bounced back, Chinese exports have benefited from the rising global market demand. The WTO predicted that global merchandise trade volume would grow 10.8 per cent in 2021. Bangladesh can earn $21 billion if it can clutch merely a 1 per cent share of China's import.
In comparison of Bangladesh's export with other countries it is seen that Vietnam exported USD 49 billion, India USD 19 billion, Malaysia $ 38 billion, Thailand $ 30 billion in 2020-21, while Bangladesh exported only $ 680 million in the period. From the statistics it is seen that in 2016-17 export was about a billion from Bangladesh, but in the following year export declined.
Among the important items of Bangladesh's export are textile accessories, rawhide, footwear, cotton waste, iron and steel waste, wood charcoal, fish and fisheries products, plastic articles, copper articles. Interestingly, China imports similar products from the above mentioned countries in a huge quantity, say, more that billion dollars where Bangladesh's export is meager, about 10-40 million US dollar. We have seen that after the emergence of COVID China has introduced a number of health safety related regulations, especially relating to food products. Very recently, General Administration of Customs China (GACC) has introduced a policy of compulsory registration for food products, with different levels of GACC requirements covering almost all types of imported food items. Some items exported from Bangladesh require this registration, such as -- fish, vegetables and vegetable products and a number of primary and processed food products. Exporters have started taking registration. Concerned export supporting organisation should extend all support so that the registration process is completed soon.
Initially, there was an issue raised by the exporters about Certificate of Origin, and it was heard that as the forms are being published from China, there are sometimes scarcity of getting the forms. However, the problem have been resolved now as the embassy itself is now supplying the forms.
In all types of duty free access, rules of origin are a major criterion. In case of China, in order to be eligible for duty-free benefit under DFQF, export goods from the LDCs will have to comply with the following rules of origin: goods entirely obtained from or manufactured in the beneficiary country; or incompletely obtained from or manufactured in the beneficiary country but where the final substantial transformation is completed. In case of LDC the value addition is at least 35 per cent, for others it is 40 per cent. In respect of value addition criterion to be met, jute and jute based products, wood charcoal, leather goods, textile products, cotton waste, iron and ore waste, plastic products have the potential to be exported to China. These products are being imported by China from other developing countries. Bangladesh needs to capitalise its potential in exporting these items in substantial volumes.
Originating goods of the beneficiary country which are transported to China through other countries or regions, with or without trans-shipment or temporary storage shall be determined as direct consignment, provided that the goods do not enter into trade or consumption there; the goods do not undergo any operation there other than unloading, reloading or any other operations required to keep them in good condition; the goods shall be subject to the control of customs or related government competent authorities in such countries or regions; and the goods which enter other countries or regions shall stay no longer than 6 months. In most of the cases Bangladesh has to depend on other countries for export, which causes delay due to cumbersome policies. Bangladesh needs to address these issues. A valid Certificate of Origin is another requirement. If Customs has received the electronic data information of a Certificate of Origin of a beneficiary country via electronic data exchange system, it is not compulsory for importers to submit a Certificate of Origin for goods of that beneficiary country. For advance ruling goods, importers may submit a Declaration of Origin rather than a certificate, commercial invoice of the goods, transport documents covering the whole route from the beneficiary country to ports of entry in China etc.
For goods transported into the territory of China through other countries or regions, importers shall submit certified documents issued by customs authority of that country or region or other documents accepted by China's customs. These documents mentioned above are not compulsory when customs has obtained electronic data information of certified documents via related electronic data system for transshipment.
It is clear that electronic customs and port system is another requirement to become an effective exporting country. Bangladesh is a signatory to the Trade Facilitation agreement, however a very few of the provisions have been implemented. Advance ruling policy has been framed but its implementation is not sufficient. Similar is the case for authorised economic operators, the country would need to be sincere for real electronic data exchange.
LDC graduation has created a lot of opportunities, at the same time a number of challenges. There is no guarantee to get into the EU's GSP+ scheme on expiry of the EBA initiative after graduation from the LDC group in 2026. There is no alternative but to exploit opportunities to increase export to the existing markets.
China has contributed a lot towards economic development of Bangladesh. Infrastructure development is one such. We should now go for detailed analysis for identifying potential products for which Bangladesh has capacity to export to the huge Chinese market and at the same time develop required digital infrastructure for exploiting the opportunities.
Ferdaus Ara Begum is Chief Executive Officer, Business Initiative Leading Development (BUILD).