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US-China trade tension

BD may get 'competitive' edge: BB assessment

Gains to depend on infrastructural readiness

Munima Sultana | November 04, 2018 00:00:00

The ongoing US-China trade tension may create a short-term "competitive advantage" for Bangladesh in both import and export sectors, according to an assessment of the Bangladesh Bank.

But the central bank, in the quarterly assessment report published last week, made it clear the potential gain will depend on addressing infrastructural and financial issues.

"Bangladesh is likely to gain competitive advantage for this segment of export products," the assessment report said.

But it will depend on how Bangladesh addresses the issues such as infrastructural changes, competition from other countries, financing readiness, skilled labour shortage, and depreciation of the Chinese currency, the report added.

Based on available information, the central bank made the attempt to assess possible impacts on the external health of the country's economy, though it said it is too early to forecast.

Meanwhile, the ministry of commerce (MoC) has also made an informal assessment of the impact as the central bank did on the short-term benefit in both export and import.

Commerce ministry officials said like many other countries, Bangladesh may feel the heat if this trade tension lingers, even triggering global recession.

"Bangladesh must be cautious about taking competitive advantage and maintaining the export-import market," said a trade official involved in the assessment.

About 7.0 per cent of the country's total current exports are found identical to those of China that faced US tariff.

China's 6,831 export products worth US$ 250 billion are now under US tariff.

Of these, 75 Bangladesh products are of the same HS code, which is valued at $ 2.27 billion.

Also, the report said some 33 per cent of the country's total import items are identical to Chinese exports under US Tariff, which is 37 per cent in the case of similar products.

"Bangladesh's export to China is quite small suggesting that exogenous shock from China is likely to have bigger impact through the import channel," the report noted.

China is Bangladesh's largest import partner covering items like cotton, electronics products, man-made staple fibres, knitted fabrics, iron and steel, plastic and paper products, chemicals, fertilisers, etc.

On the other hand, Bangladesh runs trade surplus with the United States exporting readymade garments, shrimp, home textiles, jute and jute products, leather and leather products, handicrafts.

Main imported items from the US are oil seeds and miscellaneous grains, cotton,

iron and steel, medical equipment, cereals, pharmaceutical products etc.

The central bank said as China has continued its effort to retain its share in export-import market through depreciation of Chinese currency against US Dollar since April, Bangladeshi importers may get the competitive benefit from it.

"If China and other competing countries in the US market depreciate their own currencies, Bangladesh may lose its competitive advantage without depreciating BDT against US Dollar," the report added.

The Trump administration has so far imposed tariff upto 10 per cent on the Chinese products, which may be increased to as high as 25 per cent by January 2019.

The BB report said China's strategy to maintain the market share through productivity gain cannot be ignored.

For Bangladesh, productive capacity change may be somewhat difficult for the time being.

But different alternative management may be possible, for example, increasing production shift, coordinating with small-manufacturers, etc.

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