Experts fear Bangladesh’s exports could contract and the industry suffer setbacks if the country joins a new free trade bloc called the RCEP if its privileged market access is not secured.
At a recent high-level meeting, experts said exports to many of the Regional Comprehensive Economic Partnership (RCEP) countries could fall in the 9% to 31% range unless preferential market access options were available during the post-closure era.
These countries and possible export losses according to sources are: Japan 30.53%, South Korea 27.53%, New Zealand 11%, Australia 11%, Thailand 8.93% and China 8.29%.
Keeping this perspective in mind, the meeting proposed to assess all possible aspects and challenges before joining the huge economic bloc.
The Commerce Ministry convened the meeting to do some pre-negotiation homework to examine potential benefits and risks of joining the China-backed business grouping – the latest of numerous blocs proposed in the region and beyond in recent times or are in preparation.
Aside from clothing, beverages and tobacco, a significant number of the country’s industrial units could be harmed, according to the views emerging from the meeting.
However, the volume of investments will increase by an estimated 3.36%, which could have a positive impact on bilateral trade with RCEP member states as it is a Mega Regional Trade Agreement (RTA).
Before joining the RCEP, Bangladesh decided to further explore the opportunities and challenges related to industrial capacity, overall revenue risk, investment potential, service sector, regional value chain and e-commerce, according to the meeting minutes.
It has also decided to seek political guidance in launching Bangladesh’s accession process to the world’s largest alliance.
Bangladesh has decided to look into the process of admitting Hong Kong and Macau to the RCEP as they have recently applied for membership.
The meeting discussed the need for a study on how potential Bangladesh products will enter the market and how much investment could come to Bangladesh from RCEP countries.
Launched in January 2022, the RCEP is a Free Trade Agreement (FTA) between the ten member states of the Association of Southeast Asian Nations (ASEAN) and the others.
ASEAN members are Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam, and its five free trade partners are Australia, China, Japan, New Zealand and the Republic of Korea.
As the world’s largest free trade area, the 15 RCEP participating countries make up almost half of the world’s population and contribute around 30 percent to global GDP and over a quarter to world exports.
The export volume of Bangladeshi goods in the region was US$3.9 billion in FY21 and imported goods worth US$24.5 billion.
On the other hand, the volume of service exports at the same time was $1.8 billion, and imports were $2.6 billion over the same period.
Bangladesh currently enjoys preferential market facilities in many RCEP countries in the form of Preferential Trade Agreements (PTA) or GSP facilities.
Many developed countries would not grant duty-free facilities to Bangladesh after its graduation from LDC status in 2026 and would face open competition in its foreign trade after 2029.
The study mentioned that RCEP includes some of Bangladesh’s key export destinations as well as key import sources.
In view of the bilateral trade scenario, RCEP remains more of an important partner from Bangladesh’s perspective.
Imports from RCEP contribute around 43.92% to total world imports of Bangladesh, 55.33% to total tax revenue and 58.56% to total revenue from customs duties collected in FY21.
Since some major import sources of Bangladesh such as China, Japan, Thailand, South Korea, Indonesia, Malaysia and Australia are involved with RCEP, there is a risk of some loss of sales from these countries.
More than 68% of all RCEP merchandise exports fall under the apparel product category.
The top 20 export items according to RCEP consist mainly of clothing products, and these twenty products account for 64% of the total export items.
It says that the likely increase in imports coupled with a comparatively protective Bangladesh regime quantifies a likely large revenue loss for Bangladesh compared to that of the RCEP.