Experts: Bangladesh must utilize China's extended duty-free market access

[Black_cats]

Experts: Bangladesh must utilize China's extended duty-free market access
Ibrahim Hossain Ovi

• Published at 09:13 pm July 23rd, 2020

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Recently, the Chinese government granted duty-free access to 97% of Bangladeshi products to its market effective from July 1, 2020

Economists and trade leaders on Thursday urged the government and exporters to take advantage of China’s extended duty free market access as Bangladesh can earn an additional $1.4 billion with the current export supply capacity.

Recently, the Chinese government granted duty-free access to 97% of Bangladeshi products to its market effective from July 1, 2020.

They made the call at a virtual workshop titled “Covid-19 and International Trade Issues: Policy Options for Promoting Bangladesh’s Exports” organized by the Economic Reporters’ Forum.

Commerce Minister Tipu Munshi joined as chief guest, while Dhaka Chamber of Commerce and Industry (DCCI) President Shams Mahmud and Chairman of Business Initiative Leading Development (BUILD) Abul Kashem Khan, attended as guests of honour.

“China’s extended duty free market access is a golden opportunity for Bangladesh. We should make use of the opportunity right now, as LDC graduation will mean the discontinuation of duty-free market access in China," said Mohammad Abdur Razzaque, research director at Policy Research Institute.

China is the second largest economy with a $14 trillion domestic market, which will reach $30 trillion soon. There are huge market prospects for Bangladesh as only about 30% export potential in China is currently utilized, said the economist.

"Bangladesh can earn an additional $1.4 billion using the current export supply capacity. On the other hand, if we can increase our market share by 1%, an additional $25 billion worth of export is possible, he added.

In the last fiscal, Bangladesh's exports to China were $600 million.

He also argued that no other LDC country has the capacity like Bangladesh and we can gain the most from this offer.

The government is working to tap the opportunity, said the commerce minister.

“After the Covid-19 pandemic, the US-China trade war has become more prominent. While Japan and European Union are also thinking about reducing dependency on China, we have to take advantage,” said Tipu Munshi.

"We are focusing on what will help to increase export and employment generation," said the minister.

FDI crucial to tap opportunity

In the post-Covid world, investors will relocate businesses and their investment from China due to supply security, and also to cut dependency on China for sourcing goods and raw materials, said Abul Kasem Khan.

"Bangladesh has to rethink its policies to adjust to post-Covid world trade and economic issues. We have to create a supply base for raw materials," said Kasem.

"In these areas, attracting foreign direct investment is very crucial and this should be done without delay. If we miss the opportunity, the other competitors will snatch the opportunities," he added.

“Use the duty-free market access to attract diverted investment,” said Razzaque.

Since China has a big domestic market everyone wants to enter the market and duty free market access from Bangladesh will encourage foreign investors to invest here to take advantage of zero tariff, he added.

After Chinese president Xi Jinping’s visit in 2016, Chinese state-owned enterprises (SoEs) pledged to invest almost $28 billion but since then managed to disburse only $986 million.

In the last year, Bangladesh received $2.87 billion FDI, of which $625 million came from China, the single largest investors.

However, the Commerce Minister said: “To attract FDI, we have changed lots of things and offer opportunities which are being offered by our competitors.

Bangladesh call for deferment of LDC review in 2021

Bangladesh should appeal for deferment of review for LDC to be conducted in February 2021.

With the existing data taken before the pandemic, Bangladesh will qualify but it would not reflect the real picture in context of post-Covid, said Razzaque.

If the 2021 review takes place, by taking a leadership role Bangladesh could also request the UN not to recommend any country for graduation based on the 2021 review.

Bangladesh could ask for a proper review later may be in 2024 by when the impact of Covid-19 could be clear.

Given this unprecedented situation, Bangladesh could consult with all other LDCs to postpone all graduation until 2030 by when LDCs are aiming to realize the SDGs, he said, adding that Bangladesh can request for the deferment of its own graduation.

Bangladesh to lose $9 billion in FY20

Covid-19 impacts are transmitted through two channels, global recession and weak demand and supply side shocks. In economic value-added terms, $9 billion to $21 billion could be lost until June 2020, said the economist.

In addition, the remittances are under pressure although June 2020 receipts were much stronger than expected, while poverty impacts of Covid-19 have been subject matters of intense discussions, he added.

https://www.dhakatribune.com/busine...lize-china-s-extended-duty-free-market-access

 

[bluesky]

https://tbsnews.net/economy/trade/new-export-potential-unlocked-chinese-market-95629

New export potential unlocked in Chinese market
Starting from July 1, some 8,256 Bangladeshi products will get zero tariff facility in the Chinese market

The world economy is battered by the coronavirus pandemic and the global trade is almost in a standstill for the last five months. Factories are being closed down in the country due to cancellation in buying orders in the garment sector.

Amid such a grim economic situation, Bangladesh's large trading partner China has offered a breath of relief.

The country has offered zero tariff facility to 97% of items imported from Bangladesh.

The new announcement will come into effect on July 1 this year. From that day, 8,256 Bangladeshi products will get zero tariff facility in the Chinese market.


Bangladeshi manufacturers will be able to avail this duty-free and quota-free facility after 40% value addition to these products.

After the decision was approved by the Chinese government on June 16 (Tuesday), the country notified the Bangladesh government about it on Friday through the Bangladesh High Commission in China.

Stakeholders concerned believe this opportunity is expected to give a boost to Bangladesh's exports to the Chinese market and attract foreign investment into Bangladesh.

There is a strong prospect of expanding markets of Bangladeshi pharmaceutical products, readymade garments, frozen food, fish and vegetables in China.

The Bangladesh government hopes the new facility will help to reduce the expanding trade gap between Bangladesh and China.

Mamun Rashid, joint-secretary to Bangladesh China Chamber of Commerce and Industry, told The Business Standard there is a huge demand for Bangladeshi traditional products as well as pharmaceutical items in China that has a population of around 140 crore.

"Bangladesh could not use that potential for not having duty-free access to the Chinese market," he said, adding, "it has opened up a new opportunity for Bangladesh."

According to sources at the Ministry of Commerce, Bangladesh has been enjoying zero tariff facility on 60 percent of export items to China since July 1, 2010 under Asia Pacific Trade Agreement (APTA) for LDCs.

However, Bangladesh was not able to benefit much from the opportunity as the facility was on less important export items other than the principal exportable items of Bangladesh . The latest facility would ensure unimpeded access of Bangladeshi products to the Chinese market.

Hafizur Rahman, joint-secretary to the commerce ministry and chief of the WTO Cell, told The Business Standard, "There are many products in Bangladesh which are good in quality but much cheaper when compared to those of China. Those products can find a place in the Chinese market."

Pointing out that China is ready to shift a large number of mills and factories to other countries owing to tough compliance requirements and high costs of production, he said Bangladesh could become a potential investment destination for China.

The broader access of Bangladeshi products to the Chinese market will help reduce the expanding trade gap between the two countries and also will help to create employment in the country by attracting more foreign investment, he hoped.

China has been enjoying an upper hand in bilateral trade. In the last fiscal year, China exported $12 billion worth of goods to Bangladesh, while Bangladesh's exports to the country stood at a paltry $831 million.

Businesses claim that even though labour in Bangladesh is cheaper than in China and that Bangladeshi products have huge demand in Chinese market, Bangladesh is not being able to increase exports to China due to tariffs.

Bangladesh Tanners' Association President Shahin Ahmed said Bangladesh could previously export over 3,000 products to China without facing tariff barriers by adding 35 percent value to those. However, since the more prominent export items were out of the list of products under the facility, Bangladesh could not get the facility on most of the potential export items.

At present China buys 50 percent of Bangladesh's tannery products, he said, adding that the sector will benefit from the newly announced facility.

Bangladesh Association of Pharmaceutical Industries Secretary Shafiuzzaman said, "Although Bangladesh's pharmaceutical industry relies on raw materials from China, we can supply cheaper drugs to China."

Pharmaceutical companies in Bangladesh can still make profit by exporting drugs of similar standard at 20-25% cheaper rates than those offered by Chinese manufacturers, he said, adding that the new tariff-free facility will help to expand the market for Bangladeshi drugs in China.

Commenting on this, Bangladesh Garment Manufacturers and Owners Association President Rubana Huq told The Business Standard, "China used to provide us duty free access for 60% items of all the tariff lines under its LDC scheme through WTO notification, and I think this has been extended to 98% since the formalities were going on for quite some time."

"For most of the items we used to enjoy duty-free and quota-free access to China under the prevailing facility, if there were few items left it will now be included," she added.

There are certain issues regarding duty free access to China, she continued, "There are two schemes through which we can get duty free, one is LDC scheme through WTO, and the other is APTA.

"Though apparently the duty-free and quota-free facility is more beneficial for us at this moment than APTA with respect to product coverage and tariff cut, but when we will lose LDC status we will have to go for APTA."

However, Joint Secretary Hafizur Rahman of the commerce ministry said the new facility will not be affected by Bangladesh's graduation from the LDC status. "The APTA facility has just been put on hold because of this new facility. We will get it back after graduation from the LDC status."

China or Bangladesh: Who to benefit from the move?

The commerce ministry said all potential Bangladeshi export products will get duty-free and quota-free access to China from July 1 this year, but Bangladesh will not have to offer any facility to China for this.

Commerce Secretary Jafar Uddin said China has offered this facility unilaterally to the LDCs at the behest of the World Trade Organisation so Bangladesh will get this facility unconditionally.

Forty-one LDCs including Vietnam, Cambodia, Laos, and the Philippines have been enjoying zero tariff treatment on their export items to China.

However, Khondaker Golam Moazzem, senior research director of the Centre for Policy Dialogue, said although China has granted this facility to Bangladesh unconditionally, it will be benefited from this indirectly.

He said, "Due to its industrial policy, China is gradually moving away from lighter industries. The country is producing expensive products instead of cheaper ones.

"China will get an opportunity to shift these factories to other countries and then import those products under the zero tariff facility."

Besides, investing in Bangladesh is profitable for Chinese investors as labour has become costlier in China.

Recently, the Chinese government granted duty-free access to 97% of Bangladeshi products to its market effective from July 1, 2020

some 8,256 Bangladeshi products will get zero tariff facility in the Chinese market

All the news repeat 97% and 8,256 items. But, I just do not understand how BD can export this wide variety of items without Chinese industrialists themselves build their own factories on BD soil, produce thousands of many such finished or semi-finished items and export them to their home market.

I wonder if I am missing something in the news. @Black_cats or someone else, can you guys clarify this point, how Bd can possibly meet the export quota?

 

[Bengal71]

https://tbsnews.net/economy/trade/new-export-potential-unlocked-chinese-market-95629

New export potential unlocked in Chinese market
Starting from July 1, some 8,256 Bangladeshi products will get zero tariff facility in the Chinese market

All the news repeat 97% and 8,256 items. But, I just do not understand how BD can export this wide variety of items without Chinese industrialists themselves build their own factories on BD soil, produce thousands of many such finished or semi-finished items and export them to their home market.

I wonder if I am missing something in the news. @Black_cats or someone else, can you guys clarify this point, how Bd can possibly meet the export quota?

in various meeting

Well I presume it's 97% of the items BD already produce?

 

[bluesky]

Well I presume it's 97% of the items BD already produce?

Can you name a few, say a 100 items if possible? I have not seen anything that says about the items. They cite only the number and 97% but without even small specifics of the products.

However, if it is so that BD factories already produces the items, there are ample reasons to celebrate.

 

[Nilgiri]

Can you name a few, say a 100 items if possible? I have not seen anything that says about the items. They cite only the number and 97% but without even small specifics of the products.

However, if it is so that BD factories already produces the items, there are ample reasons to celebrate.

Well you can look at BD export make up:

https://oec.world/en/profile/country/bgd/

and then look at the specific codes and see all the subcategories (for say under textiles bracket):

https://www.foreign-trade.com/reference/hscode.htm?cat=9

These would all have further sub categories too that might be coming into count here.

You get a high 97% strike rate because BD export diversity is not that high if say China gives DFA for all of textile sector stuff for example.

In fact they seem to have added more than that too like pharma, frozen foods, fish etc

One larger category under fish has these many categories:

https://www.foreign-trade.com/reference/hscode.htm?code=0302

So the 8k number of total products covered is not surprising.

However, if it is so that BD factories already produces the items, there are ample reasons to celebrate.

Yes its existing stuff that BD produce already as you can see. But what is the actual effect on BD exports achieved level remain to be seen as from 2015 there was already DFA from china for about 3000 products (covering about 60% of export categories that BD was exporting):

https://www.orfonline.org/research/...imports-a-diplomatic-victory-for-china-69400/

In 2015, China granted duty-free access to 3,095 Bangladeshi products to its markets. The present declaration that granted 5,161 products is an addition to the prevailing facilities. Bangladesh has also been enjoying preferential tariff facilities as a member of Asia Pacific Trade agreement, originally known as Bangkok agreement signed in 1975, which was rechristened in its present name in 2005.

China had instituted the duty-free quota privileges for the LDCs in 2010, and 24 countries were given this benefit initially. In 2015, Bangladesh was partially given this facility. Sixty percent of its export products were allowed to enjoy the zero-duty tariff scheme.

==================

But exports did not increase much to China....about 100 million dollar increase in level for 2018:

BD exports to China:

2015 = 878 million USD
2018 = 973 million USD

That too maybe someone can provide a breakdown overall on what the earlier 3000 products overall categories were compared to the new 5000 products added to them now. If the early 3000 already involved bulk of BD export sector (i.e textiles) already, then I see no real huge effect....as either BD competitiveness is not that high to Chinese internal RMG market or there are significant chinese NTB in play or both.

 

[bluesky]

Well you can look at BD export make up:

https://oec.world/en/profile/country/bgd/

and then look at the specific codes and see all the subcategories (for say under textiles bracket):

https://www.foreign-trade.com/reference/hscode.htm?cat=9

These would all have further sub categories too that might be coming into count here.

You get a high 97% strike rate because BD export diversity is not that high if say China gives DFA for all of textile sector stuff for example.

In fact they seem to have added more than that too like pharma, frozen foods, fish etc

One larger category under fish has these many categories:

https://www.foreign-trade.com/reference/hscode.htm?code=0302

So the 8k number of total products covered is not surprising.



Yes its existing stuff that BD produce already as you can see. But what is the actual effect on BD exports achieved level remain to be seen as from 2015 there was already DFA from china for about 3000 products (covering about 60% of export categories that BD was exporting):

https://www.orfonline.org/research/...imports-a-diplomatic-victory-for-china-69400/

In 2015, China granted duty-free access to 3,095 Bangladeshi products to its markets. The present declaration that granted 5,161 products is an addition to the prevailing facilities. Bangladesh has also been enjoying preferential tariff facilities as a member of Asia Pacific Trade agreement, originally known as Bangkok agreement signed in 1975, which was rechristened in its present name in 2005.

China had instituted the duty-free quota privileges for the LDCs in 2010, and 24 countries were given this benefit initially. In 2015, Bangladesh was partially given this facility. Sixty percent of its export products were allowed to enjoy the zero-duty tariff scheme.

==================

But exports did not increase much to China....about 100 million dollar increase in level for 2018:

BD exports to China:

2015 = 878 million USD
2018 = 973 million USD

That too maybe someone can provide a breakdown overall on what the earlier 3000 products overall categories were compared to the new 5000 products added to them now. If the early 3000 already involved bulk of BD export sector (i.e textiles) already, then I see no real huge effect....as either BD competitiveness is not that high to Chinese internal RMG market or there are significant chinese NTB in play or both.

No, what you sent is not specific. Only BD/China govt sources can provide the data on export items that would get preferential treatment. Some 8,250 items are too long a list, but BD side always talks on the number and percent but not mentioning the name of items.

BD may have to build workshops to produce many of these items that may not be feasible unless Chinese companies themselves come and build the factories to cater to their own needs. Chinese FDIs will certainly propel the country's economy upward.

 

[Nilgiri]

No, what you sent is not specific. Only BD/China govt sources can provide the data on export items that would get preferential treatment. Some 8,250 items are too long a list, but BD side always talks on the number and percent but not mentioning the name of items.

If its 97% of existing BD export profile, you dont need to take much of wild guess given 90% of BD exports are RMG and leather goods etc.

Its all the different RMG sector products, leather products...and also some seafood and pharma products BD also exports right now.

But sure BD govt can maybe release the details for the previous 3000 and now the new 5000.

BD may have to build workshops to produce many of these items that may not be feasible unless Chinese companies themselves come and build the factories to cater to their own needs. Chinese FDIs will certainly propel the country's economy upward.

I dont think there is anything new in the old 3000 then or new 5000 now that BD is not exporting already. It would be a case of ramp up your exports in these sectors and invest in new ones as possible. BD needs to reform a huge deal its investment climate to get new industries of sustenance beyond what the DFA from China and other countries covers.

 

[Bengal71]

Can you name a few, say a 100 items if possible? I have not seen anything that says about the items. They cite only the number and 97% but without even small specifics of the products.

However, if it is so that BD factories already produces the items, there are ample reasons to celebrate.

I don't know the items.

 

[bluesky]

Yours is a vag

I dont think there is anything new in the old 3000 then or new 5000 now that BD is not exporting already.

Yours is rather a vague answer. I want to see a little specifics of the export items, present or future.

 

[Nilgiri]

Yours is rather a vague answer. I want to see a little specifics of the export items, present or future.

Well knowing BAL, we wont get that....we can watch over longer period of time the vetted export numbers though...since recipients of these are not BAL.

 

[idune]

Bangladeshi and Chinese authorities need to watchful that indians don't sneak their product and materials and try to export using Bangladeshi label. Indians are famous for such frauds.