If democracies do not fight each other, as the core Kantian argument goes, then clearly, expanding trade becomes a natural and lucrative engagement. Bangladesh's democratic embrace from 1991 proved pivotal in spiking commerce in a way that pushed growth rate over 4 per cent annually for one-quarter of a century ? helping the country shed its 'basket-case' (1971) image for credentials worthy of the 'Next Eleven' most dynamic economies of the world in 2014.
Based on figures in the International Monetary Fund's Direction of Trade Statistics(DOTS), exports multiplied from 1.68 billion US$ in 1991 to 22.251 billion dollars in 2012, and imports, likewise, from 3.421 billion dollars to 34.16 billion dollars over those years. Grimacing over the trade deficit worsening from about 1.8 billion dollars to almost 12 billion dollars was more than offset by job creation to feed the RMG exports, gender-neutral job distribution that brought an extra family income while reducing the diminishing population birth-rate, and upgrading purchasing power at the lower social tiers through micro-credit initiatives.
At least six trade-related changes demonstrate the country's overall stable economic fundamentals.
First, since Bangladesh makes money in the industrialized world and loses more than its surpluses in Asian countries, the old structural inequality paradigm between developed and developing countries is not only irrelevant, but also hard to detect. It is less dependent on countries importing from here. With the United States, Germany, and the United Kingdom remaining its top export destinations today, as in 1991, while France, Italy, and the Netherlands have held on to the next three positions, both then and today (Spain getting set to join them as a significant new importer), its income side of the equation remains as sound as one can expect. This is equally true of countries exporting to us. India, China, Japan, South Korea, and Singapore jostle for the top import sources as much today as in the 1990s(with Australia, Indonesia, Malaysia, and Thailand making increasing noise)?but since conspicuous consumption rather than raw materials largely define its imports from other countries, the scope for dependence cannot be high since elimination of automobiles, electrical goods, and other manufactured products is far easier than oil or food.
Two messages emerge. On the one hand, industrialised countries reify thecountry's low-wage exports but as RMG exports boost income, increasing conspicuous consumption pushes it more to Asian markets than western ones. On the other, its low-wage exports cannot continue forever. Attention should be given to dismantling export-led growth strategies of Asian countries.
The policy-making lesson is clear: broaden export destinations and import sources. Whereas the former task would help Bangladesh hedge against global recession or oil price-hikes (since these could dampen RMG markets), the latter demands that it sought more reciprocal arrangements with its Asian partners in order to permit trade diversification to become the engine of trade-deficit reduction.
Second, with more commercial stability than ever before, any breakdown with one country can easily be offset by Partner B compensating for losses with Partner A. Just in 1991, there were at least 50 countries in the DOTS list where the country did not export to and 67 it did not import from. Contrast those figures to only 46 it did not export to in 2012 and 33 it did not import from. A slow sophistication of its economy is still double-edged since its RMG export destinations cannot expand by much. Yet consumption easily spreads to more products and countries. Bluntly put, fewer countries can turn the trade tap off on Bangladesh to punish it.
The policy-making lesson would be to soften the automatic trickle-down that trade has fomented through income distribution and casting foreign economic policies even wider to more countries. Pushed to the limit, this message points to a third profound feature. Since a neo-liberal policy approach has steadily but silently become a part and parcel of trading orientation here because RMG exports go to industrialised countries where barriers have been reduced far more rapidly than in several emerging Asian economies. Then wider market openings for Asian countries give it policy-making leverages should it wished to employ them.
Therefore, the policy-making lesson of emphasising reciprocal arrangements should not be ignored: whereas a state-managed foreign economic policy approach would hurt us more. Market-based measures are the time-tested magic formula the country's diplomats must sell across Asia.
Fifth, the incumbent government has been a better agent of trade expansion than others. Clearly, the growth of exports and imports after 2008 have been larger than between 2002-7 (which is remarkable given the Great Recession), just as growth between 1996-2001 proved more robust than in the prior five-year span. The policy-making lesson is to install safeguards against crony capitalism and proprietorship-mindedness among elected officials: otherwise, not just trade, but the entire social fabric would be threatened.
Finally, trade trends portend future trouble. In 1991, the United States gulped more than one-quarter of the country's exports (26.6 per cent), but by 2012, that figure plunged to 16.6 per cent. Likewise imports from the United States registered a sharp decline from 5.1 per cent in 1991 to merely 1.67 per cent in 2012. On the other hand, India soft-pedalled its imports by not only purchasing a paltry 1.36 per cent of our exports in 1991, but by also registering stingy increases to only 2.3 per cent in 2012, while also swamping with not only 5.5 per cent of Bangladesh's imports in 1991, but also more than doubling that figure to 13.7 per cent in 2012.
The country's policy implication ought to be to adroitly narrow this neighbourly gap, certainly through partner diversification if bilateral arrangements fail. It could explore the virtually untapped Chinese market, where low-wage imports may soon displace low-wage exports as the country climbs the GDP/capita ladder, but also South America and East Europe. Ultimately, India holds the prize future market it must somehow access.
The country's diplomats certainly have their work cut out for them and it is through the opening up of sizable foreign markets that it may be able to tackle spiking income inequality. In short, its season in the commercial sun demands that Bangladesh took the mantle of neo-liberal leadership locally, neutralize Chinese and Indian penetration through viable export strategies, and continue to extract maximum RMG mileage before it evaporates.
The writer is Professor Emeritus of International Relations, Universidad Iberoamericana, Mexico City
Email: inv198@hotmail.com
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