UN recommends Bangladesh sign bilateral FTAs with major trading countries

The United Nations (UN) has strongly recommended Bangladesh sign Free Trade Agreements (FTAs) with major trading partners like China to counter a regime without duty-free access facility after graduation to a developing nation after 2027.

UN made the observation in its latest report titled World Economic Situation and Prospects.

“As Bangladesh becomes unable to rely on multilateral preferences, following its probable loss of EBA in 2027, it may consider negotiating free trade agreements [FTAs] or bilateral agreements with a number of major trading partners, such as China,” said the report published on Monday.

The regulations of the World Trade Organisation stipulates the least developed countries(LDCs) like Bangladesh will lose duty-free and quota-free facility in the countries falling under the European Union once they graduate to the status of developing country.

“Talks with Sri Lanka have already begun. An FTA with Europe could be an alternative to EBA and the Generalized System of Preferences Plus [GSP+],” said the UN report.

The report said Bangladesh, Lao People’s Democratic Republic and Myanmar met the graduation criteria for the first time in 2018, but would need to do so again for a second time at the next triennial review in 2021 to be considered for graduation. 

Graduating from LDCs stands to lose several benefits delivered exclusively to members of the category—including trade preferences, certain forms of technical and financial support, dedicated climate financing, and other measures such as travel assistance and smaller contributions to the United Nations budget, it added.

“Multilateral trade preferences for LDCs, such as duty-free quota-free market access under the European Union’s (EU) Everything But Arms (EBA) initiative, are particularly important,” reads the report.

“Bangladesh, for instance, the biggest LDC and the world’s second-largest garment exporter, sends half of its garment exports to the EU and enjoys a tariff preference margin of 9.6% on many of its exports to that market. “

Focusing on the trade policy of Bangladesh, the UN report further said the country is unusual in that it has no bilateral trade agreements (although it is a member of regional agreements Bay of Bengal Initiative for Multi-Sectoral, Technical and Economic Cooperation (BIMSTEC) and South Asian Free Trade Area (SAFTA)).

“For Bangladesh, therefore, the next few years will be crucial, given that any bilateral agreements or FTAs negotiated now are likely to set a precedent for future agreements. The power-based nature of bilateral negotiations, however, makes this a much more challenging environment than the multilateralism that has governed trade up to this point,” concludes the report.

Speaking to the Dhaka Tribune, Additional Secretary at the Ministry of Commerce Shafiqul Islam, said the government is looking forward to forge bilateral FTAs with countries like China, Malaysia, and Turkey.

“We have undertaken a joint feasibility study with China on forging a bilateral FTA,” Shafiqul added.

As around 55% of Bangladesh products are exported to European countries under the EBA program, or under the duty-free arrangement, naturally the country would seek to gain GSP+ facility after graduation.