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Bangladesh revamping trade policies to boost exports

"Bangladesh’s merchandise exports in the last couple of years have declined to a single digit. The country’s average export growth between FY15 and FY18 was only 5.03 per cent. Moreover, export earnings in the last three years have fallen behind annual projection of the Seventh Five-Year Plan (7FYP). In the past fiscal year, value of merchandise export stood at $36.66 billion as against the projected $42.0 billion. The government has targeted export earnings of $39.0 billion for the current fiscal year (FY19). This is much lower than the projected figure of $47.46 billion. The government has also set an annual target of service export at $5.0 billion in the current fiscal year against the actual export of $4.53 billion in FY18."

 

Bangladesh revamping trade policies to boost exports 002Bangladesh’s merchandise exports in the last couple of years have declined to a single digit. The country’s average export growth between FY15 and FY18 was only 5.03 per cent. Moreover, export earnings in the last three years have fallen behind annual projection of the Seventh Five-Year Plan (7FYP). In the past fiscal year, value of merchandise export stood at $36.66 billion as against the projected $42.0 billion.

The government has targeted export earnings of $39.0 billion for the current fiscal year (FY19). This is much lower than the projected figure of $47.46 billion. The government has also set an annual target of service export at $5.0 billion in the current fiscal year against the actual export of $4.53 billion in FY18.

Implications of US-China tariff war

The ongoing tariff war between US and China has disturbed the trade order of the world. Trump has been trying to avoid a global trade order since heBangladesh revamping trade policies to boost exports 001 assumed office in 2017. In July, the US imposed 25 per cent tariff on Chinese goods worth $34 billion to which China retaliated by imposing its own tariffs on the US goods. The US is again planning to impose a 25 per cent tariff on $16 billion worth of Chinese goods starting August 23. This tariff war is provoking many other countries to increase tariffs on their imports. For instance, India doubled the tariff on more than 300 textile products to 20 per cent on August 07. The hike is mainly targeted to contain import from China.

Increase in Bangladeshi exports

Export from Bangladesh surged around 30 per cent in the past fiscal year and stood at $873.27 million compared to $672.40 million in FY17. This is for the first time Bangladesh's exports to India crossed $800 million. Textile products, ready-made garment (RMG) to be precise, contributed significantly to the increase of export to India where Bangladesh is enjoying tariff-free market access. The increased tariff will not, however, be applicable to countries which have free trade deals with India.

Effects of a trade war on LDCs

As per estimates of The United Nations Conference on Trade and Development (UNCTAD) Bangladeshi products may face an average tariff over 40 per cent if the world enters a full-fledged trade war. The UN body fears this trade war will severely affect the world's poorest countries and dash the hope of doubling the share of the Least Developed Countries' (LDCs) in global exports by 2020 under the Sustainable Development Goals (SDGs).

The World Trade Statistical Review 2018 states merchandise exports of LDCs increased 13 per cent to reach $164.23 billion which is around 0.96 per cent of the total global export in 2017. As per the SDGs target, the share of LDCs' export to global exports would have to reach 2.0 per cent. In the ongoing volatile trade regime, it is unlikely that the LDCs will be able to reach the target within three years.

Refurbishing the policies

To increase these exports, the export policy needs to be revamped. The tenure of the current three-year export policy ended in June this year. Any delay in finalising and enforcing the new policy may send wrong signals to the exporters. The potential sectors would not get adequate policy and fiscal supports. Efforts of exploring new markets and increasing the shares in the emerging markets may also slow down. Therefore, a long-term trade strategy is essential to prepare the country to face the challenges of the global trade war.

 

 
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