Bangladesh proposal on setting local value addition criterion for least developed countries (LDCs) at 30 per cent, instead of 40 per cent, in preferential trade among the Developing-8 (D-8) countries has triggered strong opposition from most of the bloc members, sources said.
Only Malaysia has supported the proposal while Egypt, Pakistan and Turkey opposed it.
Bangladesh is the lone LDC in the bloc. The other members of the group have already graduated to 'developing countries'.
As an LDC, Bangladesh wants to enjoy the preferential trade facility through 30 per cent value addition. To this end, it demanded amendment to the rules of origin criterion which had been set at 40 per cent.
At a recent meeting of the supervisory committee of D-8 preferential trade agreement (PTA) in Ankara, Egyptian trade officials said as an LDC Bangladesh has already been given special treatment in the elimination of para-tariffs barrier.
According to the Article-9 of the D-8 PTA, the contracting members shall eliminate the para-tariffs immediately upon the entry into force of the agreement while the LDCs will eliminate the para-tariffs within three years.
Pakistani officials opposed the proposal saying that as an LDC Bangladesh was not lagging behind in exports, especially in the apparel sector.
The Turkish delegation members said completion of the internal processes regarding the amendment procedure of the D-8 Rules of Origin (RoO) would take two to three more years. They suggested Bangladesh to ratify the PTA and other documents, and if the country faced any adverse effect in the future, the other members should take care of the problem at a later stage.
Nigerian officials proposed to allow Bangladesh 30 per cent value addition for a specific period, like four years, and enforce 40 per cent value addition after that.
A senior commerce ministry official told the FE that the issue would be finalised at the Trade Ministers' Council meeting next month in Turkey. If the Bangladesh proposal is not viewed positively at the meeting, the issue would not be put on the agenda any more, since it has been under discussion for a long time.
He said Bangladesh would not be benefited if 40 per cent value addition in Rules of Origin was applied to all member-countries.
"In most cases, Bangladesh needs to be dependent on imported raw materials. It won't be possible for Bangladeshi exporters to be competitive with 40 per cent local value addition with raw materials imported from abroad," said another commerce ministry official.
He said the D-8 principle of benefiting all members equitably would not be followed due to the fact that Bangladesh would not be in a position to comply with the 40 per cent value addition criterion.
"We had consultation with the stakeholders who were of the opinion that 40 per cent local value addition won't be possible for them," the trade official added.
He said Dhaka has examined the offer list of the D-8 member-counties and found that Bangladesh was not in a position to comply with the 40 per cent local value addition criterion for any product.
Bangladesh has a significant trade imbalance with other D-8 member-countries. In fiscal year 2011-12 Bangladesh's total import from the other D-8 members was valued at US$ 3,526 million while export to them was valued at $821 million.
Bangladesh has been enjoying benefits from other preferential arrangements and generalised preference schemes because of favourable RoO criteria.
The value addition criterion for LDCs in South Asian Free Trade Area (SAFTA) and Trade Preferential System among the Organization of Islamic Conference (OIC) member-countries is set at 30 per cent.
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