Bangladesh News Bangladesh decides to join largest trade bloc

[Isa Khan]

Bangladesh has decided to join the world's largest trading bloc, the Regional Comprehensive Economic Partnership (RCEP), to stay eligible for duty-free trade facilities in the markets of nearly one-third of the global economies after it graduates to a developing nation in 2026.

The commerce ministry will send a formal proposal to the RCEP headquarters, conveying the country's interest in availing a membership to the bloc, as decided in a meeting on Sunday, Hafizur Rahman, additional secretary to the ministry, told The Business Standard.

With the trading alliance of 15 economies, including China and Japan, entering into force at the beginning of 2022, Bangladesh's exports to the RCEP nations will not face much trouble until 2026 when the country's duty-free access to these two major markets will end, according to commerce ministry officials.

The country is getting duty-free facilities in New Zealand and Australia too. But after the LDC graduation, such facilities will no longer be available.

Besides, if Bangladesh does not join the RCEP or sign free trade agreements separately with those countries by 2026, it will lose its competitive edge in apparel export destinations, especially in China and Japan, while its competitor Vietnam as an RCEP signatory will enjoy duty-free access there after the deal takes effect. In this way, ministry officials think, Bangladesh might lose its market share to Vietnam.

That is why, keeping in mind possible losses of trade benefits in RCEP member countries, Bangladesh has decided to enter the trade association, they said.

On 15 November 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 the Philippines – inked the world's largest free trade agreement that covers 2.2 billion people with a combined GDP of $26.2 trillion.

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. The RCEP is especially expected to help reduce costs and time for companies by allowing them to export a product anywhere within the bloc – 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 deal will come into effect in 60 days. Japan, Singapore and Thailand have already ratified the RCEP agreement domestically. The trading alliance plans to launch its operation in January next year.

The concept of RCEP was hatched in 2012 and gained momentum in 2017 when the US walked out of the Trans-Pacific Partnership (TPP), later renamed the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

The initiative got new impetus from the US-China trade war, which had knocked the region's economy to its lowest in five years even before Covid-19 broke out.

In November 2019, India was onboard when leaders of 16 nations concluded RCEP negotiations in Bangkok and expected to sign the deal formally in 2020. India later pulled out, citing unresolved issues.

During that time, Bangladesh had stayed aloof from the entire negotiation process in the formation of the world's largest trade bloc. Later, experts opined that Bangladesh might lose trade benefits and face problems in attracting foreign direct investment because of the China-led RCEP. They suggested that Bangladesh try to join or at least sign a deal with the RCEP to safeguard its economy after graduating to a developing country.

Within a week into the formation of the trading bloc last year, Bangladesh's commerce ministry formed a nine-member committee to assess any possible negative impact from the RCEP on the country's exports. The committee was also tasked with identifying what benefits Bangladesh would get if it joined the free trading bloc.

According to the committee, 10 Asean countries have already introduced duty-free trade facilities among themselves. Among the remaining six signatories, China and Japan are important markets for Bangladesh as it is getting duty-free access to these countries.

Bangladesh's exports to four other countries, including Australia and New Zealand, are low. So, the commerce ministry does not think the RCEP will cause any problem for Bangladesh immediately. When Bangladesh graduates to a developing country, there will be a negative impact on exports and foreign direct investment, it added.

The committee submitted a report to the ministry after reviewing what is in the RCEP agreement, Dr Mostafa Abid Khan, member of the committee and immediate-past member of the Bangladesh Trade and Tariff Commission, told TBS.

No work has been done yet on probable problems that Bangladesh's exports will face because of the RCEP or what benefits the country would get if it joined the trade alliance, he said, adding that a thorough analysis on such issues is required before submitting a formal proposal for joining the RCEP.

"We have to calculate how much benefit Bangladesh will get by joining the RCEP and how much other countries will have in return from us. Analysing the tariff schedule in the deal, it will be clear how much we will get. To get extra, if any, we have to work on availing that by devising an action plan," Dr Mostafa pointed out.

It is not necessary to send a proposal for membership right now. The trading bloc will add new members six months after the RCEP agreement takes effect. In the meantime, Bangladesh will have to complete all necessary preparations, he added.

He thinks that applying for membership without analysing profits and losses will not bring any benefit.

When the US-led 12-nation Trans-Pacific Partnership (TPP) agreement was drafted in 2015, the commerce ministry sought views of Bangladesh embassies in various countries on the agreement's possible negative impact on Bangladesh's exports and ways to overcome it.

Tapan Kanti Ghosh, Bangladesh's then commercial counsellor in Brussels, gave opinions in writing in favour of joining the China-led RCEP to counter the potential impact posed by the TPP. If it was not possible to join the RCEP, he suggested signing a free trade agreement with China after graduating to a developing country.

According to the commerce ministry, 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).

Bangladesh decides to join largest trade bloc

Commerce ministry will send a formal proposal to the China-led RCEP

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[Isa Khan]

Bangladesh has taken up the initiative to join Regional Comprehensive Economic Partnership (RCEP) to retain duty benefits once it makes the United Nations status graduation from a least developed country to a developing one in 2026.

An inter-ministerial meeting agreed that the county will join the RCEP, an agreement comprising the world's largest trade bloc led by China, if an opportunity is created after negotiations, said the commerce ministry.

"So, we discussed different aspects of a study on joining to the RCEP conducted by the Bangladesh Trade and Tariff Commission (BTTC)," said Tapan Kanti Ghosh, senior secretary to the commerce ministry, yesterday.

Seeking opinion from different ministries and departments concerned is the beginning of the process and the BTTC suggested joining the initiative, he told after the meeting held at the ministry.

Ghosh could not exactly state what trade benefit Bangladesh would gain joining the RCEP. The Daily Star is yet to obtain a copy of the BTTC study.

So, in the near future, Bangladesh may send a formal letter expressing interest to join the trade bloc if there is political agreement within the country and if the RCEP's terms and conditions allow inclusion of a new member, said Ghosh.

In fact, it is important for Bangladesh to sign the agreement with the RCEP as the country also needs to join the global value chain to retain duty benefits after the LDC graduation, he said.

Earlier, Bangladesh had not shown any interest in joining the RCEP to safeguard its revenue generation from duties on imports.

On the other hand, none of the would-be RCEP signatories asked Bangladesh to join their ranks prior to its launch in November 2020.

China initiated the RCEP as a free trade agreement among itself, the 10 Association of Southeast Asian Nations (Asean) states and Australia, India, Japan, South Korea and New Zealand.

India later refused to join the RCEP. The negotiations were formally launched at an Asean summit in Cambodia in November 2020.

In 2017, prospective RCEP member states accounted for a population of 3.4 billion or 45 per cent of the world's population and about 40 per cent of world trade.

The total gross domestic product (GDP) amounted to $49.5 trillion, more than half of which is made up of that of China and India, surpassing the combined GDP of Trans-Pacific Partnership (TPP) members in 2007.

On January 23, 2017, US President Donald Trump signed a memorandum that stated withdrawal of the country from the TPP, a move which is seen to improve the chances of success for the RCEP.

According to estimates by the PricewaterhouseCoopers, the GDP of the RCEP member states is likely to amount to nearly $250 trillion by 2050.

Bangladesh has been lobbying with major trading partners and economic blocs for signing free trade agreements, comprehensive economic partnership agreements and preferential trade agreements.

It has been focused on retaining duty benefits as the local exporters will face anything from 8 per cent to 12 per cent in duties after the status graduation.

And the country may lose $7 billion worth of exports in a year because of erosion of preferential duty benefits for the LDC graduation, according to different studies.

Bangladesh moves to join RCEP

Bangladesh has taken up the initiative to join Regional Comprehensive Economic Partnership (RCEP) to retain duty benefits once it makes the United Nations status graduation from a least developed country to a developing one in 2026.

www.thedailystar.net

 

[Isa Khan]

The Bangladesh Trade and Tariff Commission (BTTC) is conducting further studies on possible outcomes of the country joining the world's largest China-led trade deal, Regional Comprehensive Economic Partnership (RCEP), Senior Commerce Secretary Tapan Kanti Ghosh said yesterday.

In July this year, the BTTC in a study said Bangladesh would greatly benefit in international trade if the country joins this mega regional trade deal.

"However, we need to conduct more studies before joining the RCEP as some terms and conditions seem tough for us to abide by," Ghosh told The Daily Star at his office in Dhaka yesterday.

So, the BTTC has been assigned to conduct studies on the RCEP further, Ghosh said, adding that Bangladesh's target was to grab a bigger market share under the 10-member Association of Southeast Asian Nations (Asean) trade bloc alongside another six countries by joining the RCEP.

"We could see that Bangladesh imports more from the RCEP signatory countries," Ghosh said, adding that Bangladesh has been looking to find ways to export more goods by signing the RCEP agreement.

Bangladesh imports textile materials and capital machinery from the RCEP nations.

Once Bangladesh makes the United Nations status graduation from a least developed country (LDC) to a developing one, preferential trade benefits will erode and Bangladesh will need preferential market access globally by signing trade agreements.

"We will sign trade deals keeping in minds three important factors including protecting our domestic industries, revenue generation by the government from import tariff and market access after the LDC graduation," Ghosh said.

"So, we are moving a bit slow in signing the trade deal," he added.

For instance, Bangladesh imports goods worth more than $20 billion from China, the country's single largest source for imports, from where the government receives nearly Tk 30,000 crore in the form of import tariff.

Similarly, Bangladesh imports goods worth more than $16 billion from India, the second largest source for imports, and the government earns nearly Tk 20,000 crore from it as import tariff in a year.

Once, the country makes the graduation from an LDC to a developing nation in 2026, Bangladesh will have to gradually liberalise its tariff regime for other trading nations for which the government will lose a big amount of revenue from import duty.

In the particular case of the RCEP, Ghosh said Bangladesh has up to December next year to inform whether it would be joining the RCEP.

Currently, Bangladesh has been negotiating with different trading partners to sign free trade agreements (FTAs), comprehensive economic partnership agreements (CEPAs) and preferential trade agreements (PTAs) to retain preferential trade benefits after the LDC graduation.

However, so far, Bangladesh could sign only a PTA with Bhutan in December 2020 enabling 34 Bhutanese goods zero-duty market access to Bangladesh and 100 of Bangladesh's to Bhutan.

Retaining the duty-free market access for Bangladesh is very important as more than 73 per cent of the country's exports come under the purview of benefits enabled for LDCs and as an LDC, the country enjoys duty benefits to 38 countries.

A recent estimate of World Trade Organization (WTO) said after the LDC graduation, Bangladesh would lose 15 per cent of trade.

If the export value of $42.61 billion of last fiscal year is taken into account, there is a possibility of losing $6.39 billion in a year after the LDC graduation.

The loss will be substantial in the markets of Canada, Japan and European Union due to the increase of tariffs to around 14.47 per cent, 8.89 per cent and 8.91 per cent respectively, said Mostafa Abid Khan, former member of the BTTC, in an article recently.

Earlier in July this year, an inter-ministerial meeting agreed that the county would join the RCEP if an opportunity was created after negotiations.

China initiated the RCEP as a free trade agreement among itself, the 10 Asean states and Australia, India, Japan, South Korea and New Zealand.

India later refused to join the RCEP. The negotiations were formally launched at an Asean summit in Cambodia in November 2020.

In 2017, prospective RCEP member states accounted for a population of 3.4 billion or 45 per cent of the world's population and about 40 per cent of world trade.

The total gross domestic product (GDP) amounted to $49.5 trillion, more than half of which is made up of that of China and India, surpassing the combined GDP of Trans-Pacific Partnership (TPP) members in 2007.

On January 23, 2017, US President Donald Trump signed a memorandum that stated withdrawal of the country from the TPP, a trade agreement between 12 Pacific Rim economies, a move which is believed to have improved the chances of success for the RCEP.

According to estimates by PricewaterhouseCoopers, the GDP of the RCEP member states is likely to amount to nearly $250 trillion by 2050.

Further studies underway on joining RCEP

The Bangladesh Trade and Tariff Commission (BTTC) is conducting further studies on possible outcomes of the country joining the world’s largest China-led trade deal, Regional Comprehensive Economic Partnership (RCEP), Senior Commerce Secretary Tapan Kanti Ghosh said yesterday.

www.thedailystar.net

 

[Isa Khan]

The government is scrutinising the conditions to join the Regional Comprehensive Economic Partnership (RCEP), the world's largest trade bloc led by China, as well as weighing the pros and cons of joining the treaty.

The RCEP, a pact of 15 countries accounting for about 30% of the world's population (2.3 billion people) and a market of $26.3 trillion, was launched in January last year.

The commerce ministry has already started a formal review of the commitments that Bangladesh has to fulfil in order to join the bloc, by looking at the commitments made by Bangladesh's peer economies Vietnam, Cambodia and Laos which are RCEP members.

An official of the commerce ministry, on condition of anonymity, told The Business Standard that Bangladesh may have to make similar commitments to join the pact. That is why, a meeting has been convened next Tuesday, 1 August, to review the extent to which Bangladesh can comply with these commitments.

Senior Secretary of the commerce ministry Tapan Kanti Ghosh will chair the meeting.

Additional Secretary of the commerce ministry Noor Md Mahbubul Haq told TBS, "A study was conducted on Bangladesh's accession to the RCEP. The meeting will be held on Tuesday to review the findings of that study."

Last year, the Bangladesh Trade and Tariff Commission conducted a feasibility study on Bangladesh's accession to the RCEP. The report was mostly in favour of inclusion.

According to RCEP rules, any country can apply for accession to this bloc 18 months after its launch. Hence, interested countries are free to apply for joining the treaty from June 2023.

Tariff Commission study in favour of accession

The Tariff Commission in its study explored the pros and cons of joining the RCEP. The report was mostly in favour of accession to the pact.

According to the Tariff Commission report, joining the RCEP will increase Bangladesh's exports to the global market by 17.37%, amounting to more than $5 billion.

However, a major part of the export growth will come from the ready-made garments sector. As a result, the demand for skilled and unskilled workers in the garment sector will increase by about 18%. Joining the RCEP would also boost the country's GDP by a marginal 0.23%.

Several disadvantages also emerged in the Tariff Commission report. The overall industrial production outside of the ready-made garment sector may decline and Bangladesh's revenue and income from import duties may also decline. If Bangladesh joins the RCEP, consumers will benefit, but manufacturers may not do so well.

The feasibility study was led by the then-member of the Tariff Commission Dr Mostafa Abid Khan.

He told TBS, "Three things are important in making a final decision on joining this bloc – assessment, ability to fulfil commitments and review of the benefits."

"Assessment has already been completed. Countries with similar economies to Bangladesh like Vietnam, Cambodia, and Laos have joined the RCEP. By reviewing the commitments they have made, it will be clear whether Bangladesh has the ability to comply with those," Mostofa Abid Khan added.

The Tariff Commission in its report said, "The government may express its positive stand regarding the accession of Bangladesh to RCEP considering all the issues…."

The concerns and changes in domestic rules are indeed issues that require further scrutiny.

Pros and cons of RCEP

On 15 November 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 the Philippines — inked the world's largest free trade agreement.

While Bangladesh would enjoy duty-free access to other RCEP countries, those countries would also get the same advantage as Bangladesh.

Accession to the RCEP would result in a significant increase in Bangladesh's global imports, which would grow by 14.46%.

This liberalisation of the trade regime would have an impact on many domestic industries which would no longer receive the current level of protection.

Textiles, leather products, transport equipment, metal products, paper, light, chemicals, pharmaceuticals and manufacturing could all see some level of replacement by imported products.

Joining the RCEP would thus force Bangladesh to drastically diversify its export basket, a call that has been made repeatedly over the years.

The Tariff Commission recommendation to join the RCEP comes in light of Bangladesh preparing to graduate to a middle-income country, which would mean it would lose a number of trade preferences.

Of the 15 countries in the RCEP, Bangladesh enjoys duty-free export to Australia, Japan, New Zealand, China, South Korea and Thailand, which will be gone once it graduates from the LDC status in 2026.

Joining the RCEP would mean retaining the export facilities in these markets, while there will also be benefits of increased manpower exports and in turn remittance growth.

The heavy focus on benefits for the RMG sector — the key talking point of the RCEP — stems from the fact that the top 20 export items to the RCEP are RMG products and these constitute 64% of the total exports.

But the Tariff Commission shows that this will be driven solely by the clothing sector and at the cost of negative impact on most of the other industries.

The RMG sector could grow by more than $5.04 billion and exports of a few other sectors like textile, leather products, meat and livestock, beverages and tobacco would also have some positive impact, but again this won't be the case for most others.

"From an industrial perspective, only the apparel sector is likely to gain. Apart from the apparel sector, the overall fall of industrial output would decrease by 0.46%," the Tariff Commission said in its report.

The rise in exports will also not offset the rise in imports when Bangladesh joins the RCEP. Both would go up, but most of the domestic industries would be adversely affected by increased imports and the global trade deficit would increase by 2.69%.

Bangladesh is also more import-dependent on the RCEP, with 45% of its imports coming from that region as opposed to only 10% of exports.

A reciprocal 100% linear tariff cut both by Bangladesh and the RCEP may likely result in an increase in imports for both parties, though import increases for Bangladesh would be much higher.

As a result, the estimated revenue loss is likely to be higher for Bangladesh, $2.5 billion compared to around $541 million for the RCEP.

RCEP countries are responsible for around 43.92% of the total global import of Bangladesh, 55.33% of the total tax revenue and 58.56% of total customs duty revenue collected as of FY 2020-21.

Among the fifteen parties to RCEP, China remains the single largest contributor in terms of import and revenue generation, around 45% and 44% respectively of the total of RCEP.

Govt examines pros-cons of joining world's biggest trade bloc

The RCEP, a pact of 15 countries accounting for about 30% of the world’s population (2.3 billion people) and a market of $26.3 trillion, was launched in January last year

www.tbsnews.net

 

[Isa Khan]

An inter-ministerial meeting has in principle decided in favour of Bangladesh joining the Regional Comprehensive Economic Partnership (RCEP), the world's largest trading bloc led by China.

The decision, made on Tuesday in an inter-ministerial meeting chaired by Senior Commerce Secretary Tapan Kanti Ghosh, will now require approval from the Cabinet.

"The inter-ministerial meeting, with some precautions, has made a decision in favour of Bangladesh joining the RCEP," Noor Md Mahbubul Haq, an additional secretary (FTA) of the commerce ministry who was authorised by the meeting to speak to the media, told a group of reporters.

Officials from the Prime Minister's Office, the ministries of Textiles and Jute, Agriculture, Food, and Fisheries and Livestock, and the National Board of Revenue were present in the inter-ministerial meeting.

Asked when the application will be filed, he said the agreement does not state anything about the accession process.

"That means now we have to inquire whether Bangladesh will need to make an application or follow a prescribed model to join the RCEP," he elaborated.

The RCEP, a pact of 15 countries that accounts for about 30% of the world's population (2.3 billion people) and a market of $26.3 trillion, was launched in January last year.

According to the rules, since 1 July this year, other countries can also apply to join the bloc, and Sri Lanka and Hong Kong have already filed their applications to become its members.

During the meeting, they also reviewed the commitments made by Vietnam, which is Bangladesh's peer and a rival country in international trade, to join the trading bloc.

Several officials who participated in the meeting highlighted that in the 21st century, the centre of the global economy comprises East Asian countries, including Asean, which are part of the RCEP. Therefore, it would be logical for Bangladesh to join the centre of the world economy.

The officials said that although RCEP is called a China-led trading bloc, America's close allies such as Japan, South Korea and Australia are also members. Moreover, India can also join RCEP as a founding member at any time.

On the other hand, out of the countries with which Bangladesh is now negotiating to sign free trade agreements, six have been included in the RCEP. The possibility of increasing Bangladesh's exports by $5 billion after joining this bloc has emerged in a feasibility study.

The RCEP countries have taken 10 to 25 years to reduce their tariffs. In this case, Bangladesh will have to do separate negotiations with each country if it joins the bloc.

Commerce ministry officials said that the majority of those present at the meeting were in favour of joining the RCEP. They said that the importance of connecting to the regional value chain through inclusion in RCEP has gained importance. In this case, the opinion has also been raised about the possibility of how much Bangladesh's exports can increase.

According to a commerce ministry official, Vietnam imports raw materials from China. Chinese investment in the country is also huge. Again, Vietnam's exports to the RCEP countries, including China, are significant. As a result, Vietnam is already connected to and integrated into the value chain of RCEP countries.

"Although Bangladesh is outside this integration, our main source of raw material imports is China. In this situation, how Bangladesh can benefit from joining RCEP, the issue got importance in the meeting," he added.

The official said Bangladesh is preparing to sign a Comprehensive Economic Partnership Agreement with India, which may join the RCEP at any time. In the case of Bangladesh, the issue of bilateral agreements with India and involvement in the regional value chain was discussed as one of the issues in the meeting.

He further said that tariffs have to be reduced for 90% of the trade in the first 10 years after joining RCEP. An additional 15 years will be available for reducing the remaining 10% of the tariff.

He said that in the case of negotiations with each RCEP country, Bangladesh should carefully review the laws and regulations. The negotiations should be conducted while considering the benefits that Bangladesh can gain in the service sector, investment, and TRIPS (Trade-Related Aspects of Intellectual Property Rights).

Additionally, there is a need to conduct adequate studies in advance to determine where Bangladesh will keep its reservations, the official added.

Professor Mostafizur Rahman, a distinguished fellow at the Center for Policy Dialogue, said it is a "good initiative," adding that the preparations Bangladesh is making for joining the RCEP along with Free Trade Agreement (FTA) negotiations with various countries on the eve of LDC (Least Developed Country) graduation is a "timely step".

He said trade liberalisation and the reduction of tariffs are necessary steps for joining the RCEP. Standardisation, harmonisation, and quality control measures are crucial to enhancing the competitiveness of local industries.

The noted economist told TBS that there were two types of rules in the ASEAN agreement. Some countries, including Cambodia, used to get extra benefits compared to others. Bangladesh may also seek similar benefits from the RCEP.

"That is, we would receive more benefits from the RCEP countries but would give less, which is less than the reciprocal system," he added.

Professor Mostafizur Rahman said once Bangladesh joined RCEP, the government's revenue from customs duties would decrease when importing goods from these countries.

"The government will have to compensate for this by increasing exports. That is why foreign investment should be given importance, and when investment from RCEP countries in Bangladesh increases, exports will also increase. Through this, export diversification will also be possible," he added.

He said currently, 12% of Bangladesh's exports go to South Asia, East Asia, and Asean countries.

Al Mamun Mridha, general secretary of the Bangladesh-China Chamber of Commerce and Industries, said China's investment in the countries that have joined RCEP has increased significantly in the last one and a half years.

"If Bangladesh joins RCEP, Chinese investment in Bangladesh will also increase. In addition to the diversification of export products, the industrial sector of Bangladesh will get an opportunity to develop through technology transfer," he told TBS.

Noor Md Mahbubul Haq said, "Among those with whom we are currently negotiating FTAs, apart from India, six countries – Japan, Indonesia, Malaysia, Singapore, South Korea, and China – are in the RCEP. That is, we are negotiating bilateral agreements with the countries that are part of the bloc. Since the countries have a forum with which Bangladesh is interested in doing an FTA, importance should be given to how Bangladesh will be involved in bilateral and group-based negotiations."

Officials at the commerce ministry said that in the transformation that is happening in the country's textile sector, man made fibre is gaining importance over cotton in the coming days. Bangladesh will have to give importance to how much it can export to the RCEP countries.

They said Bangladesh is protecting its domestic industry by imposing high tariffs and barriers on imports. As a result, Its entrepreneurs find it more profitable to sell products in the local market than to export. In this situation, the country must be careful about how competitive the domestic industry will be if it joins the RCEP.

India stopped from joining RCEP at the last minute due to concerns about the competitiveness of its local industries. Asean already has an FTA with India, which has put pressure on India's local industries. As a result, India chose not to join the RCEP to safeguard its domestic industries.

Officials at the commerce ministry stated that the Import Policy Order, Export Policy Order, Tariff Policy, and FTA Policy are currently under process with a focus on LDC graduation and trade liberalisation.

They said the country will have to work on how it will use the 10- to 25-year period for tariff reduction, how it will be adjusted with the economic transformation, and how the RCEP can be connected with the LDC graduation.

It was Bangladesh's fourth meeting on RCEP. Earlier, the first meeting was held by the Ministry of Commerce after collecting reports from various embassies about the bloc. In the second and third meetings, emphasis was placed on conducting a feasibility study for joining the RCEP.

Tariff Commission study in favour of accession

The Tariff Commission in its study explored the pros and cons of joining the RCEP. The report was mostly in favour of accession to the pact.

According to the Tariff Commission report, joining the RCEP will increase Bangladesh's exports to the global market by 17.37%, amounting to more than $5 billion.

Ministries positive about joining China-led trading bloc RCEP

The decision, made on Tuesday in an inter-ministerial meeting chaired by Senior Commerce Secretary Tapan Kanti Ghosh, will now require approval from the Cabinet

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[Isa Khan]

Bangladesh intends to submit its formal application for the membership of the Regional Comprehensive Economic Partnership (RCEP), the world's largest trade bloc led by China, once it receives approval from the Prime Minister's Office.

"A summary [on the pros and cons of joining the bloc] has been sent to the prime minister. Upon approval, a formal letter of interest will be sent to the RCEP for Bangladesh's accession as a member," Additional Secretary of the Ministry of Commerce (FTA) Noor Md Mahbubul Haq told The Business Standard on Sunday.

However, it will take at least two to three years for Bangladesh to join the bloc after submission of the application due to a lengthy negotiation period, said ministry officials.

The RCEP member countries signed the free trade agreement in November 2020. However, countries intending to be part of it had to start negotiations for joining the pact in 2012. Each country negotiated separately with each other regarding trade issues such as tariffs. Bangladesh will also have to conduct separate negotiations with the 15 RCEP members, which will take time, according to officials.

An inter-ministerial meeting chaired by Commerce Secretary Tapan Kanti Ghosh last month decided in favour of joining the bloc. The ministry has already initiated the application process and as part of that, a summary was sent to the prime minister for a final go-ahead.

The RCEP came into effect on 1 January 2022. According to the pact's rules, from 1 July 2023 onward, other countries can also accede to the pact. Sri Lanka and Hong Kong have already applied for accession.

Ministry officials said numerous issues were taken into consideration before making the policy decision to join the RCEP. Countries in East and South Asia, which are members of the RCEP, will be the heart of the world economy in this century. Hence, it will be logical for Bangladesh to connect with that process.

They said although the RCEP is referred to as a China-led trade bloc, close US allies Japan, South Korea and Australia are also members of it. Moreover, India can accede to the RCEP at any time as a founding member.

On the other hand, among the countries with which Bangladesh is now negotiating to sign free trade agreements, six countries – Japan, Indonesia, Malaysia, Singapore, South Korea and China – are in the RCEP.

Bangladesh has also conducted a feasibility study on joining the RCEP and the study found that joining the bloc could increase Bangladesh's exports by $5 billion.

The 15 RCEP countries account for about 30% of the world's population (2.3 billion people) and a market of $26.3 trillion.

Members of the trade bloc have to negotiate trade tariffs with one another. If it joins the RCEP, Bangladesh also has to reduce import tariffs, subject to negotiations with other members. However, import tariffs can be reduced gradually over a period of 10 to 25 years as per RCEP rules.

Ministry officials said making a connection with the regional value chain through the RCEP has huge significance.

For instance, Vietnam imports raw materials from China and Chinese investment in the country is also huge. On the other hand, Vietnam's exports to countries, including China, are significant. As a result, Vietnam is already connected and integrated with the value chain of the RCEP countries.

Although Bangladesh is outside this integration, China is its main source of raw material imports. So, how Bangladesh can benefit by joining the RCEP is a matter of importance, said a commerce ministry official on condition of anonymity.

He also said in the first 10 years of joining the RCEP, import tariffs have to be reduced for about 90% of the trade among member states. An additional 15 years will be available for tariff reduction of the remaining 10% trade.

Ministry officials also said Bangladesh is formulating the Import Policy Order, Export Policy Order, Tariff Policy, and Free Trade Agreement (FTA) Policy with emphasis on LDC graduation and trade liberalisation

Bangladesh’s application to join RCEP awaits PM’s nod

It will take two to three years for Bangladesh to join the bloc after submitting application

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