The UK is the third-largest destination for Bangladesh’s exports after the US and Germany
The British government on Wednesday announced that goods from Bangladesh would continue to enjoy duty-free access to the UK following Brexit, in what can be viewed as a spot of good news for the country’s exporters, who have been on edge given the emerging second wave of COVID-19 cases in much of the Western world.
The UK is the third-largest destination for Bangladesh’s exports after the US and Germany.
While the UK is no longer a member of the EU, the two parties are in the transition period now. The new UK-EU relationship will take effect from the new year.
Since 1973, Bangladeshi goods have been enjoying zero-duty access to the EU under its Everything but Arms scheme for the least-developed countries (LDCs).
After the UK voted to leave the EU, there was a possibility that the country’s exports would be subjected to duty upon entry.
Now the announcement from the UK has put all jitters to bed.
“Imports from 47 of the world’s least-developed countries, including Bangladesh and Malawi, will not face any tariffs -- supporting their economic development through business and trade,” read the announcement from the Department for International Trade, Foreign, Commonwealth & Development Office.
“We welcome the decision. From the very beginning, the UK government has assured us that they will keep the trade benefits unchanged for Bangladesh,” Commerce Minister Tipu Munshi told Dhaka Tribune on Wednesday.
Within the next seven days, the government will hold a meeting with the British High Commissioner in Bangladesh to learn the modalities of the duty-free market access after the execution of Brexit deal, Munshi added.
“This is definitely good news for Bangladesh,” Commerce Secretary Md Jafar Uddin told Dhaka Tribune over the phone yesterday.
The next focus now should be increase exports to the UK through product diversification, he said, while citing jute and jute diversified goods and leather products as items that can be pushed more to the British Isles.
In fiscal 2019-20, Bangladesh exported goods worth about $3.5 billion to the UK, down 16.7 per cent year-on-year, according to data from the Export Promotion Bureau.
“British importers will continue to pay zero or reduced tariffs on everyday goods such as clothing and vegetables from the world’s poorest countries now the UK has left the EU,” said British Trade Secretary Liz Truss.
The UK’s Generalised Scheme of Preferences (GSP) will cover all the same countries that are currently eligible for trade preferences under the EU’s GSP, allowing businesses to trade as they do now without disruption.
Free trade helps businesses to grow, boosts the economy and creates new jobs, Truss said.
“We are making sure that the world’s poorest countries can continue to take advantage of the opportunities that free trade offers them by allowing them to export their products to the UK at preferential rates.”
This will help developing economies to establish strong industries, create jobs and help them to reduce their reliance on overseas aid in the long-term.
The scheme will also help British businesses continue to trade seamlessly after “we leave the EU”, as well as give British consumers continued access to some of their favourite products at affordable prices, Truss added.
Since about 11.3 per cent of Bangladesh’s apparel exports are headed to the UK, a continuation of the existing tariff structure would keep the employment and export earnings of the sector protected to a significant extent, said Rubana Huq, president of the Bangladesh Garment Manufacturers and Exporters Association.
The market would have been impacted if Bangladesh had to pay most-favoured nations (MFN) duty, she added.
“While the pandemic has cast a devastating impact on exports, it is a positive and inspiring message for us as there was confusion about the tariff regime after Brexit,” said Abdus Salam Murshedy, Managing Director of Envoy Textiles, a leading exporter.
In these dark days, this will be a morale booster for exporters, he added.
“Since the UK government made it clear that Bangladesh will enjoy duty-free market access, it will help us get more business from British retailers and forge long-term partnerships,”said Mostafiz Uddin, managing director of Denim Expert, a supplier to British brands.
Uddin, who is also the founder of Bangladesh Denim Expo, said the Bangladeshi manufacturers will have to focus on innovative and value-added products to grab a bigger share of the UK market.
Bangladesh needs to develop a competitive edge to compete with others and the government should play an important role by providing policy support, he added.
“Both the manufacturers and buyers were in apprehension on whether the present trade benefits will be continued or not by the UK government after Brexit,” said Mohammad Hasan, managing director of Cotton Group.
With the announcement, the apprehension is over and business will go on as usual as there will be no impact on the prices of products due to tariff, Hasan said, adding that the government should keep an eye on the issue and negotiate so that the trade benefits remain the same as it was offered under the EU GSP.
“We hope there will be no change in bilateral trade between Bangladesh and the UK and it would not impact our business there,” said Sharif Zahir, Managing Director, Ananta Denim Technology, which supplies apparel products to British brands Marks & Spencer, Primark and high-street fashion conglomerate Arcadia.
Rather, the announcement hinted at strengthening the trade ties, said Zahir, also a director of the BGMEA.
However, Bangladesh would not be able to enjoy the preferential market access to the UK for long if its GSP scheme mimics the EU’s EBA scheme.
Officially, Bangladesh will become a developing country in 2024 and three more years will be given as a grace period for preparation. Normally, the EU does not give trade benefits under the EBA after a country graduates from the LDC bracket.
Earlier in May, the commerce ministry has written to the EU seeking an extension of the EBA scheme beyond 2027.