As Bangladesh is set to be graduated from the Least Developed Country (LDC) category by 2026, developing strategy for continuing the preferential market access after graduation is a key task for the country's policy makers. The government has already started to work in this regard along with developing strategy for retaining existing level of market access in the countries currently providing Duty-Free Quota-Free (DFQF) market access to Bangladesh as LDCs. There is also the need to identify potential Free Trade Agreement (FTA) partner countries and develop strategy for engaging those countries in FTA negotiations.
In terms of loss of preference margins, the most relevant developed market for the graduating Bangladesh is the European Union (EU), and to some extent Canada and Japan. In these markets, most of our exports enter duty free. Around two-thirds of Bangladesh's exports (mainly clothing) are destined for these markets.
Bangladesh's exports are concentrated mainly in the EU and North America. This direction of exports, to a large extent, determines the market access scenario following graduation.
Graduation is unlikely to cause significant impact on graduating LDCs services and service suppliers. The graduating LDCs account for 0.22 per cent of the world's services exports, with a 31 per cent share in LDC exports.
Bangladesh will have to face the challenging task of exporting on MFN tariff after the graduation in 2026, as unilateral Generalised System of Preference (GSP) schemes will be terminated immediately except for EU which will be extended for three more years under the present terms.
Average tariff increases for Bangladesh after graduation would be 8.90 per cent which is the highest among LDCs. The graduation will have a big impact on the exports of Bangladesh, which is estimated to see decline by 14 per cent.
Graduation will also create challenge to Bangladesh as most of clothing sector is not in India's tariff liberalisation schedule for non-LDC members of South Asia Free Trade Area (SAFTA). Thus, Bangladesh will have to export to India under the applied rate of duties.
Regarding clothing exports to the EU, LDC firms are only required to undertake a "single stage transformation" from fabric to clothing under the Everything But Arms (EBA) scheme, while a "double stage transformation" from fibres to fabric to clothing would be required under the standard GSP.
Under the SAFTA rules of origin, LDC participants are allowed up to 70 per cent of non-originating material, compared to 60 per cent for non-LDC parties. Graduation from LDC status would therefore not allow graduating LDCs to avail of such liberal treatment.
Graduation will also mean losing LDC preferences in Asia Pacific Trade Agreement (APTA) markets such as China and Republic of Korea to certain extent as the items on which preferences will be available will be reduced, the margin of preference will also be reduced, and Bangladesh will have to comply with a higher value addition (45 per cent instead of 35 per cent for LDCs).
Under APTA fourth round negotiations, Sri Lanka, a non-LDC, was allowed greater flexibility (to commit lower levels of commitment in tariff liberalisation) than other non-LDC members.
China still maintains LDC ISM measures in favour of Samoa which was graduated out from the UN list of LDCs in 2014. Bangladesh should also ask for similar concessions.
In the light of paragraphs 16, 17 and 18 of the UN General Assembly Resolution adopted on 21 December 2012 on smooth transition for countries graduating from the list of least developed countries (A/RES/67/221) Bangladesh may urge UN Committee for Development Policy (CDP) to extend the timeline for graduation from LDC status to nine years, as suggested by the United States (US), and continuation of ISMs for further three years from the time of graduation from the LDC category taking into account the respective implementation of STS for each graduating LDC and phasing out the ISM in next three years after that.
The support measures available under WTO and unilaterally extended by its members to LDCs should be continued for a period of three years and will be phased out during next three years after the entry into force of a decision of the UN General Assembly to exclude the member from the LDC category. This is necessary in order to ensure that graduation does not cause abrupt disruption in the LDCs trade in goods and services.
In this connection, Bangladesh should take up a proactive action plan to negotiate with the trading partners under DFQF and GSP Schemes and in other preferential agreements for extension of all support measures.
Bangladesh should also negotiate for the extension of LDC treatment under SAFTA in the light of Article 12 of SAFTA which provides for a "Special Provision for Maldives" by granting LDC terms of trade even after graduation.
Bangladesh should also take up joint action plan for harmonisation of mutual trade rules, regulatory measures and streamline bilateral institutional cooperation in the respective fields including the central banks, customs authorities, quality and standards bodies and other. The country also needs to actively engage with the trading partners to ensure harmonisation of Technical Barriers to Trade (TBT) and Sanitary and Phyto-Sanitary (SPS) measures and signing of Mutual Recognition Agreement (MRA) to streamline flow of traded goods and services so that certificates on technical regulations and standards issued by the respective accredited national bodies are accepted on basis of MRA. These are necessary to avail the market access.
Bangladesh has kept open its Public Procurements for foreign participation on MFN basis. It is time to ask for reciprocal treatment from the trading partner countries. Moreover, the country needs to take up a proactive joint action plan with the trading partners for respective customs cooperation agreement to facilitate mutual trade as envisaged in the WTO Trade Facilitation Agreement and WCO protocols and annexes including gradual harmonisation of customs documentation and clearance procedure.
Finally, to boost the process of integration of CMSMEs with the global market and compete with global e-commerce, Bangladesh, like China, India and Vietnam and others, may strive to set up warehouses and distribution network in destination markets for easy and regular delivery of products to the wholesalers, retailers and consumers.
manzurahmed019@gmail.com
© 2025 - All Rights with The Financial Express
