EU trade benefits may continue even after LDC graduation
Bangladesh may continue steadily to enjoy duty-free trade benefits in the European Union for a couple more years even following its graduation from the band of least developed countries (LDCs) as the pandemic fallouts have ravaged the economy, government officials said.
"We will hold a virtual meeting with the EU trade officials on October 12 to put our demand for an extension of the trade benefits as both economy and employment have already been severely afflicted by the ongoing pandemic," said Md Jafar Uddin, commerce secretary.
The EU is defined to review its duty-free facilities beneath the Everything But Arms (EBA) agreementin November. Beneath the EBA, all imports to the EU from the LDC are duty- and quota-free, apart from armaments.
In the meeting, the secretary will lead the Bangladesh delegation, featuring various secretaries from the labour and foreign ministries and two other specialists that he could not immediately mention.
LDCs, such as for example Bangladesh, which are set to graduate next couple of years are demanding their developing and developed counterparts to increase the duty-free benefits for preferably the next five years because so many economies have already been badly damaged by this unprecedented global crisis.
At the meeting, Bangladesh will mainly improve the problem of continuing the EU's Generalised System of Preferences (GSP) facility, Uddin said.
Officials of other countries with also make the same demand as their economies have also been influenced by Covid-29, the commerce secretary added.
Another facility that could been extended is the duty-free benefit for LDCs outlined by the World Trade Organisation (WTO).
With respect to all LDCs, the African nation of Chad already submitted a proposal to the WTO last month, seeking an extension of the GSP facilities on exports to developed and developing countries for a couple of years.
Bangladesh is a significant player in the LDC group under the WTO initiative.
"I am hoping the WTO initiative will be successful because it is a step that was taken collectively by all LDCs," Uddin said.
Earlier, Bangladesh joined hands using its peer LDCs to appeal to the WTO for a continuation of the trade benefits they currently enjoy following graduation to developing nations considering the pandemic's ill-effect on economies.
Noting Bangladesh's monetary development record, the UN Committee for Development Policy (UN CDP) is scheduled to complete the ultimate round of assessment for the country's graduation in 2021.
If the UN CDP finds the assessment positive, Bangladesh will graduate to the status of a developing country in 2024.
After the country graduates, all tariff benefits will be lifted. Only europe (EU) allows tariff benefits for Bangladesh for another 3 years as a grace period.
That means Bangladesh will love the zero-duty benefit to the EU up to 2027 but also for other countries, the tariff benefits will be withdrawn from 2024.
As an LDC, Bangladesh currently enjoys zero-duty tariff benefits, preferential trade benefits and regional trade benefits on exports to 38 countries, 28 which are within the EU.
The other 10 are: Australia, Belarus, Canada, Liechtenstein, Japan, New Zealand, Norway, Russia, Switzerland and Turkey.
In many other countries such as Chile, Brazil and those in Latin America, Bangladesh enjoys a significant decrease in duty rates.
Also, in america, Bangladesh enjoys zero-duty benefit on 97 % of its products but unfortunately, the package excludes some major export items like garments.
Due to this fact, Bangladeshi exporters need to face a 15.6 per cent duty on apparel shipments to US markets. Nevertheless, the US is the single most significant export destination for Bangladesh.
Bangladesh will face competition in Europe after graduation as Vietnam has already signed a free of charge trade agreement (FTA) with the EU. Some 74 per cent of Bangladesh's export earnings come beneath the preferential trade as an LDC.
Of this, 64 % originates from the EU and 10 % from Japan, Canada and the other developed countries.
Bangladesh's export will decline 5.7 per cent annually if the EU's EBA initiative is not extended as local exporters will have to face an 8.7 % duty on exports to the EU.
So, there is a possibility of losing a lot more than $2 billion worth of export business annually after graduation, based on the United Nations Industrial Development Organisation.
In early April, WTO economists projected a steep fall in trade in 2020, with the main question being the sheer depth of the decline.
The monetary dislocation threatens to reverse hard-won socioeconomic development gains in the LDCs and may potentially delay graduation for some countries.
Economists argue that primarily, all the LDCs should demand deferment of the graduation by at least 3 years as the global economy is severely damaged by the pandemic.
If deferment is possible, it will be better. If not, all the developing and developed countries, including those within the EU, should continue the same trade benefits at least for five years at night graduation.
