China has proposed a joint feasibility study on a bilateral free-trade agreement (FTA) to be signed with Bangladesh. Trade officials in Dhaka, however, find such pact not so beneficial to the country, officials said.
In a recent letter to the ministry of commerce (MoC) the Chinese embassy in Dhaka requested the signing of a memorandum of understanding (MoU) for launching feasibility study on the proposed trade pact.
"Enclosed herewith is the draft of the MoU. It would be highly appreciated if the esteemed ministry could positively consider the proposal and respond to the embassy at its earliest convenience," the embassy wrote in the letter.
In the draft MoU China said the feasibility study should be comprehensive and cover sectors of common interests. "Future working plans are subject to the outcome of the joint feasibility study."
A senior trade official told the FE the issue of FTA with China was discussed in a meeting last month at the MoC. The meeting concluded with the opinion that Bangladesh
would not sign a Free Trade Agreement (FTA) with any country until 2025, before losing facilities it enjoy as a least developed country (LDC).
He said signing FTA with China will cause a significant revenue loss for Bangladesh that imports substantial volume of goods from the former.
The official also said Bangladesh's import from China has reached nearly US$9.0 billion while export fetches only around $800 million.
"Bangladesh will lose $2.70 billion or more as revenue if it grants Chinese products duty-free market access through signing FTA deal," he said, quoting meeting discussion.
However, the official welcomed the proposal for feasibility study.
Statistics show that some 4,721 Bangladeshi products enjoy duty-free access to the Chinese market under the Asia-Pacific Trade Agreement (APTA) since 2010. In 2013 Bangladesh again sought duty-free access for 17 more items.
Another MoC official said Bangladesh's local industry will be hit hard if FTA is signed with a country like China having huge production capacity at a very competitive price.
He said interests of exporters, importers, domestic industry, and consumers have to be kept in balance before signing any preferential deal with any country.
"Since Bangladesh enjoys tariff preference from China under APTA, there is no logic to open our market through signing an FTA," he noted.
He pointed out that as an LDC Bangladesh is enjoying various tariff preferences in the markets of both developing and developed countries. Bangladesh's graduation to a lower-middle-income country and conclusion of the process would not be completed before or around 2025. Until then, Bangladesh will continue to enjoy the benefits as a least developed country.
Additional Research Director of the Centre for Policy Dialogue (CPD) Dr Khondaker Golam Moazzem told the FE Bangladesh should continue discussion on bilateral trade issues with rich countries as the country is set to graduate from the status of least developed country to lower- middle-income level.
But it is not certain that Bangladesh will gain from all FTAs, he said.
Mr Moazzem also said some sectors of the country may face challenges if the bilateral FTA with China is signed.
He said signing FTA with China may bring a positive result if all the three areas -- trade, investment and services -- are included in the FTA package.
When contacted Saturday, acting president of Dhaka Chamber of Commerce and Industry (DCCI) Humayun Rashid told the FE there is a possibility of further increase in imports from China once FTA is signed.
The business-body leader, however, said FTA concept is very popular globally. A significant volume of investment from China may come in Bangladesh if the agreement is finally concluded between the two countries.
"China will use our cheap human resources to produce various goods here and export those. As a result, country's export earnings will also increase," he added.
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