Duty-free access to China: ‘Bangladesh needs to develop diversified product list’

Prior to the trade facilities being granted, the country would enjoy the similar privileges for only 60% of its products under the Asia Pacific Trade Agreement (APTA) arrangement, where Bangladesh is a founding member

China provided duty–free market access facilities for 97% of products from Bangladesh to its market, effective from last July.

Prior to the trade facilities being granted, the country would enjoy the similar privileges for only 60% of its products under the Asia Pacific Trade Agreement (APTA) arrangement, where Bangladesh is a founding member.

 On June 16, 2020 China announced the duty-free export facilities for 97% of its tariff line.  With the announcement, a total of 8,256 Bangladeshi items are now eligible for zero duty facilities in the Chinese market.

After the declaration, there was anticipation that Bangladesh’s exports to China would see a sharp rise. But it has not happened so far.

Data from the Export Promotion Bureau show that the country’s exports to China stood at $110 million during the July-August period of the current FY21, down by 16.66% compared to the same period last year.

Bangladesh’ major export items to China include apparel goods, jute and jute products, rawhide and skins, plastic products, live and frozen fish and crabs.

The question now arises as to why Bangladesh was not able to earn more despite having more tariff coverage of products.  

Economists and exporters have opined that there was a lack of a diversified products basket. In addition, exporters were yet to know about the new product list as they had not come by it, they added.

“Firstly, exporters have to know about the products and choose buyers for those items. But the product line is not yet clear to the exporters,” the former lead economist of the World Bank Dhaka office, Zahid Hussain, told Dhaka Tribune.  

In witnessing the impact of the duty–free market access, it would take time as the exporters were yet to get ready, while the ongoing pandemic had brought about uncertainty in trade, said the economist.   

However, government officials said they had already informed the federations, chambers and associations about the new products covered under the new announcement by the Chinese government.

“Exports under the new duty-free access package became effective from July 1 and the exporters are getting the benefits out of the fresh trade privilege,” Md. Abdur Rahim Khan, Joint Secretary (Export Wing), told Dhaka Tribune. 

Since there was a language barrier it would take time to reap benefits, he added, saying, “We are hopeful of getting the English version of the product list by next week.”

However, the business community was of the opinion that the measure would bring benefits for exporters after a certain time.

“Under the previous duty–free market access regime, most Bangladeshi apparel items were enjoying the duty–free access facility. Now, the number of products has increased to 97%,” said BGMEA President Rubana Huq.

It would be a great opportunity for exporters to earn more from the country as it had a large population with good purchasing capacity, hoped  Rubana Huq. 

 “We are mostly exporting crushed leather to China, although it is not yet clear what kinds of new products are added in the new list,” Md. Shakawat Ullah, the Bangladesh Tanners Association General Secretary said.

He urged the government to make an orientation on new products and provide policy support to develop those products for taking the advantage from the measure.   

How to tap the opportunity

In tapping the opportunity of zero-tariff, Bangladesh needs to develop a new product line beyond the traditional one, which is mostly dominated with apparel goods.    

“Bangladesh will enjoy duty-free market access facilities for 60% of its products but exports to China did not increase as much as expected. This was because of the lack of a diversified product basket,” according to Khondaker Golam Moazzem, research director at the Centre for Policy Dialogue (CPD).

As per EPB data, out of $110 million export earnings, $59 million or about 54% came from garments during the July-August period of the current fiscal year. Processed leather contributed nearly $7 million to the total exports in the same period.

“In tapping the opportunity of duty-free market access, we must develop products that have been included in the new list. Besides, focus should be given on the previous list as well,” suggested Moazzem.    

The big challenge would be to grab the market for which investment was very crucial.  And the policymakers had to think about the capacity, whether it was ready or not, Zahid Hussain said.

If not yet ready, then the country needed to attract investment from China as their businesses were   going through a financial crisis due to the Covid-19 pandemic, he said.  

As labour costs were low in Bangladesh, Chinese investors would be interested in investing in new products as it would cost less and enjoy duty-free market access, Zahid argued.  

On the other hand, manufacturers had to standardize products’ quality to meet Chinese standards, he said. 

Since language was a barrier, “we must involve Chinese people and attract investment from the country,” Zahid added.

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