Ministry of Commerce to send formal proposal to China-led RCEP
Bangladesh has decided to join the world‘s largest trading bloc, the Regional Comprehensive Economic Partnership (RCEP), to remain eligible for duty-free trade facilities in the markets of nearly a third of the world’s economies after its passage through a developing country in 2026.
The Commerce Ministry will send a formal proposal to RCEP headquarters, expressing the country’s interest in becoming a member of the bloc, as decided at a meeting on Sunday, Hafizur Rahman, additional secretary of the ministry, told The Business Standard.
With the entry into force of the trade alliance of 15 economies, including China and Japan, in early 2022, Bangladesh’s exports to RCEP countries will not experience many problems until 2026, when the The country’s duty-free access to these two major markets will end, according to Commerce Ministry officials.
The country also enjoys tax-free facilities in New Zealand and Australia. But after the reclassification of LDCs, these facilities will no longer be available.
In addition, if Bangladesh does not join RCEP or sign free trade agreements separately with these countries by 2026, it will lose its competitive advantage in clothing export destinations, especially in China. and Japan, while its competitor Vietnam as a signatory to RCEP will benefit from tariffs. access it free of charge after entry into force of the agreement. In this way, ministry officials believe, Bangladesh could lose its market share to Vietnam.
Therefore, keeping in mind the possible loss of trade advantages in RCEP member countries, Bangladesh decided to join the trade association, they said.
On November 15, 2020, the 15 countries – China, Japan, South Korea, Australia and New Zealand; 10 members of the Association of Southeast Asian Nations (Asean): Brunei, Vietnam, Laos, Cambodia, Thailand, Myanmar, Malaysia, Singapore, Indonesia and Philippines – signed largest free trade agreement in the world which covers 2.2 billion people with a combined GDP of 26,200 billion dollars.
The deal aims to lower tariffs, open up trade in services and promote investment to help emerging economies catch up with the rest of the world. One of the things that RCEP is expected to help reduce costs and time for businesses is by allowing them to export a product anywhere in the block – without meeting separate requirements for each country.
Once ratified by three-fifths of the 15 signatories – six ASEAN countries and three non-ASEAN countries in their respective parliaments – the RCEP agreement will enter into force in 60 days. Japan, Singapore and Thailand have already ratified the RCEP agreement at the national level. The trade alliance plans to launch operations in January next year.
The concept of RCEP originated in 2012 and gained momentum in 2017 when the United States withdrew from the Trans-Pacific Partnership (TPP), later renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
The initiative received new impetus from the trade war between the United States and China, which had sent the region’s economy to its lowest level in five years before Covid-19 even erupted.
In November 2019, India was on board when the leaders of 16 countries concluded RCEP negotiations in Bangkok and expected to formally sign the deal in 2020. India then withdrew, citing problems unresolved.
Meanwhile, Bangladesh had stayed out of the entire negotiating process in forming the world’s largest trading bloc. Later, experts believed that Bangladesh may lose trade advantages and face problems attracting foreign direct investment due to the China-led RCEP. They suggested that Bangladesh try to join or at least sign an agreement with RCEP to protect its economy after graduating in a developing country.
Less than a week after the formation of the trade bloc last year, Bangladesh’s Ministry of Commerce formed a nine-member committee to assess any possible negative impact of RCEP on the country’s exports. The committee was also tasked with identifying the benefits Bangladesh would get if it joined the free trade bloc.
According to the committee, 10 ASEAN countries have already introduced duty-free trade facilities among themselves. Of the six remaining signatories, China and Japan are important markets for Bangladesh as it obtains duty-free access to these countries.
Bangladesh’s exports to four other countries, including Australia and New Zealand, are low. Thus, the Ministry of Commerce does not believe that RCEP will be a problem for Bangladesh in the immediate future. When Bangladesh moves to a developing country, there will be a negative impact on exports and foreign direct investment, he added.
The committee submitted a report to the ministry after reviewing the contents of the RCEP agreement, Dr Mostafa Abid Khan, committee member and outgoing member of the Bangladesh Trade and Tariff Commission, told TBS.
No work has yet been done on the likely problems that Bangladesh’s exports will face as a result of the RCEP or what benefits the country would get if it joins the trade alliance, he said, adding that a thorough analysis of these issues is necessary before submitting a formal proposal. to join the RCEP.
“We have to calculate the benefits Bangladesh will get by joining RCEP and how many other countries will get in return from us. By analyzing the tariff schedule of the agreement, it will be clear how much we will get. To get extra, if none, we have to work to capitalize on it by developing an action plan, âsaid Dr Mostafa.
It is not necessary to send a membership proposal now. The trading bloc will add new members six months after the RCEP agreement goes into effect. In the meantime, Bangladesh will have to complete all the necessary preparations, he added.
He believes that applying for membership without analyzing the profits and losses will not bring any benefit.
When the United States-led 12-country Trans-Pacific Partnership Agreement (TPP) was drafted in 2015, the Commerce Department sought the advice of Bangladeshi embassies in various countries on the possible negative impact of the Bangladesh export agreement and ways to overcome it.
Tapan Kanti Ghosh, then Bangladesh’s trade advisor in Brussels, spoke in writing in favor of joining the China-led RCEP to counter the potential impact of the TPP. If it was not possible to join RCEP, he suggested signing a free trade agreement with China after graduating in a developing country.
According to the Ministry of Commerce, Bangladesh is currently associated with three multilateral economic alliances – the Developing Eight (D8), the Asia-Pacific Trade Agreement (Apta) and the South Asian Free Trade Area (Safta).