Bangladesh is unlikely to gain much by signing a preferential trade agreement (PTA) with Nepal, as Kathmandu's trade treaty with Delhi stands as a barrier in this regard, officials have said.
According to the treaty of trade between India and Nepal, the two sides agreed to "accord unconditionally to each other treatment no less favourable than that accorded to any third country with respect to (a) customs duties and charges of any kind imposed on or in connection with importation and exportation, and (b) import regulations including quantitative restrictions".
Officials said if Nepal now agrees to accord any tariff concession under the proposed PTA to Bangladesh, and if that is lower than what was granted to India, the new low tariff rate will also be applicable in case of its trade with the giant neighbour.
They said Nepal's total global import amounts to US$ 10 billion, and the major part of it comes from India.
So, if tariff is lowered in the case of Bangladesh, the reduced tariff automatically applies to imports from India as well. In that case Nepal's revenue earning from import duty will fall drastically.
Thus, Nepal will be unable to lower tariff significantly for Bangladeshi products under the PTA, they said.
A study of the Bangladesh Trade and Tariff Commission (BTTC) found that Nepal can provide only 3.0-5.0 per cent tariff concessions to Bangladesh on the items included in the proposed request lists.
Only in case of potato, the Himalayan nation can offer zero-tariff facility to Bangladesh, since it granted duty-free treatment to India on this item.
The commission in this case suggested that if the government decides to agree on such low preference for signing PTA, it should pursue that the concessions be applied in accordance with the SAFTA (South Asian Free Trade Area) provisions, instead of the general rate that the Himalayan nation offers to rest of the world.
Nepal's tariff on goods, imported under the SAFTA accord, is slightly lower than its general tariff rate, according to officials.
The BTTC prepared three priority lists comprising 42 products for negotiating with Nepal to get tariff concession. Data shows that the general tariff of Nepal on these products is between 10 per cent and 40 per cent.
When contacted over telephone on Friday, BTTC member Dr Mostafa Abid Khan did not want to comment on possible gain from the proposed PTA with Nepal.
"We have forwarded our findings to the ministry, taking into consideration the facts and figures. Now the government will decide in which way it'll go forward," he added.
The Ministry of Commerce officials said Bangladesh has not signed any bilateral PTA or free trade agreement (FTA) so far. But, the government has very recently decided to sign at least a few such deals before graduating to the developing country status.
In this case the primary target is signing such treaties with the countries having low bilateral trade relations, to enhance capacity of the negotiators concerned, before opting to sign pacts with giants.
In fiscal year 2018-19, Bangladesh exported goods worth nearly US$38 million to Nepal and imported goods worth around $18 million.
Bangladesh mainly exports agricultural products, jute and jute goods, engineering products, pharmaceuticals, paper and paper boards, cotton, chemical products, ceramic products, and glass and glassware to the country.
On the other hand, Bangladesh's major imports include vegetable products, prepared foodstuff, beverages, spirits and vinegar, tobacco, zinc articles, chemical products, sulphur, man-made staple fibre, and soybean oil.
Research Director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem told the FE on Friday that since Bangladesh has no signed bilateral PTA or FTA so far, signing such a pact with countries like Nepal or Bhutan may increase negotiating capacity of the officials concerned.
However, the gain from such agreements may not be significant, as bilateral trades with these countries are very low, he noted.
"Bangladesh should pursue trade negotiation with developing or advanced developing countries, from where it received such proposals."
Negotiation can be started with countries like Vietnam and Sri Lanka, with whom Bangladesh has no big trade gap. But, talks can be started with India or China, having large trade gap, only after gaining adequate experience, he added.
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