BIMSTEC free trade area: Concerns of Bangladesh

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FE Report
The Metropolitan Chamber of Commerce and Industry (MCCI) urged the government to take into consideration the concerns of the business community in taking the final decisions on some crucial issues of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) trade negotiations.
"The main concern is the adjustment required by the domestic industries to face the competitive pressures as a result of increased imports from several BIMSTEC countries following reduction of tariff. The Government should also effectively negotiate the negative list and duty-free market access for our export items with realistic rules of origin, which are easy to comply with," the MCCI said in an editorial of October, 2007 issue of Chamber News.
Referring to the 15th meeting of the Trade Negotiating Committee (TNC) of the BIMSTEC Free Trade Area held in Dhaka on September 24-26, 2007, the MCCI said reportedly, the TNC explored the possibilities of reaching a consensus on negative list of 15 per cent of total HS lines and rules of origin criterion with 35 per cent plus change of tariff sub-heading (CTSH) [for LDCs percentage of value addition is 30 per cent].
"It means that any product in order to be eligible for preferential market access under the BIMSTEC will need to have an HS code different from the imported inputs at 6-digit level and must have at least 35 per cent (for LDCs 30 per cent) value added measured as percentage of Free On Board (FOB) price of the exportable products," the MCCI said.
It is also reported that developing country members indicated their willingness to provide special tariff concessions to some of the products of export interest of the LDCs though such products remain to be identified.
It may be mentioned that the BIMSTEC emerged as a regional bloc in 1997 at the initiative of Thailand.
Bangladesh, India, Sri Lanka, Myanmar, Bhutan and Nepal joined the Group at a later stage, which has transformed this bloc into a link between South Asia and Southeast Asia bringing together 1.3 billion people -- 21 percent of the world population.
The BIMSTEC has been seen not only as a link between SAARC and ASEAN but also a unique bloc focusing mainly on forging economic cooperation. Although at the initial stage of the BIMSTEC's formation, its work programme sought for cooperation in six areas, namely, trade and investment, technology, transportation and communication, energy, tourism and fisheries, no substantial progress has been visible in these areas except in trade.
"Signing of the Framework Agreement on BIMSTEC FTA is considered as a milestone for accelerating economic cooperation. Despite the fact that Bangladesh acceded to Framework Agreement four months after its signing by other countries in the region, we supported the Government's decision as we like to see it as a bloc for enhanced cooperation in various sectors in order to create enabling environment for ensuring equitable benefit to all countries of this bloc," the MCCI commented.
The MCCI said it expects that bigger economies of the region will take initiatives to make this group a model for regional cooperation in true sense. In this context, some of the aspects of the crucial issues which are important to Bangladesh include negotiating the size of the negative list and rules of origin, it noted.
In negotiating the size of the negative list there is a need to consider the level of industrialisation of each country. Under BIMSTEC FTA, Bangladesh, while having preferential access at zero or reduced rate in the developing country markets within three years, as a least developed country, will have the obligation to reduce/eliminate its tariffs within a period of 10 years, the chamber said.
This, according to the chamber, should take care of the sensitivity of domestic production. However, given the fact that Bangladesh's product base is limited, it will require to have a manageable size of the negative list to consider the sensitivity of agriculture and industrial products.
It observed: "At the same time, it should be recognised that bigger negative list will negate the benefit of the FTA. From this perspective, a compromise solution needs to be explored. On the other hand, from the perspective of export it is essential for Bangladesh to have duty free access to the product of its export interest.
"It is important to ensure that none of the very few export products of Bangladesh is included in the negative lists of other countries, more especially in the negative lists of two bigger economies, India and Thailand. Unless this has been agreed upon in the TNC meeting Bangladesh is likely to be deprived of the benefits to be offered by BIMSTEC FTA."
Regarding rules of origin, a resource poor country like Bangladesh, the MCCI pointed out cannot afford to comply with stringent rules of origin for most of its export products because of dependence on imported inputs.