The next few years would be crucial for Bangladesh as it has to go for power-based bilateral negotiations with major trading partners as the country would be unable to rely on multilateral trade preferences due to its graduation from least developed status, according to a United Nations report.
The report titled ’The World Economic Situation and Prospects 2019’ said, ’The graduating countries are, in a sense, victims of their own success, and new measures need to be put in place to help them after graduation. Whether or not they maintain current market access arrangements is, to some extent, a test of global attitudes towards multilateralism.’
Following the graduation from LDC, Bangladesh would lose several benefits including trade preferences, certain forms of technical and financial support, dedicated climate financing, and other measures such as travel assistance and smaller contributions to the United Nations budget.
The UN report also estimated 7.4 per cent economic growth for the current financial year of 2018-19 for Bangladesh, which is lower than the gross domestic product growth (7.86 per cent) in FY18.
The report, however, showed the GDP growth of Bangladesh at 7.3 per cent in FY18.
The report was produced jointly by United Nations Department of Economic and Social Affairs, United Nations Conference on Trade and Development, Economic Commission for Europe, Economic Commission for Latin America and the Caribbean, Economic and Social Commission for Asia and the Pacific and Economic and Social Commission for Western Asia.
The United Nations World Tourism Organisation contributed to the report.
The report observed that the GDP growth of almost one-third of LDCs was less in 2018 than in 2017 while some large LDCs including Bangladesh, Bhutan, Burkina Faso, Cambodia, Ethiopia, Lao People’s Democratic Republic, Myanmar and Senegal grew at an average 7 per cent or more.
It said the economy of Bangladesh was set to continue expanding at a fast pace in the near term, above 7.0 per cent per year due to strong fixed investment, vigorous private consumption and accommodative monetary policy.
According to the report, new risks are also emerging as global tensions build up as some developed countries are trying to replace the existing trade preferences favouring LDCs by bilateral trade agreements based on reciprocity.
Bangladesh has met the graduation criteria for the first time in 2018 and it would need to do so again for a second time at the next triennial review in 2021 to be considered for graduation, the UN report said.
’Multilateral trade preferences for LDCs, such as duty-free quota-free market access under the European Union’s (EU) Everything But Arms (EBA) initiative, are particularly important. Bangladesh, for instance, the biggest LDC and the world’s second-largest garment exporter, sends half of its garment exports to the EU and enjoys a tariff preference margin of 9.6 per cent on many of its exports to that market,’ the report read.
It also said it was unusual for Bangladesh that it had no bilateral trade agreements and the country would be unable to rely on multilateral preferences following its probable loss of EBA in 2027.
After ending the EBA regime, Bangladesh would have to consider negotiating free trade agreements or bilateral agreements with a number of major trading partners and an FTA with EU could be an alternative to EBA and the Generalised System of Preferences Plus, the report mentioned.
’For Bangladesh, therefore, the next few years will be crucial, given that any bilateral agreements or FTAs negotiated now are likely to set a precedent for future agreements. The power-based nature of bilateral negotiations, however, makes this a much more challenging environment than the multilateralism that has governed trade up to this point,’ the report said.
Citing a UNCTAD research, the UN report said that trade agreements were often recycled from previous treaties, and powerful countries acted as ’rule makers’ whereas poorer ones became ’rule takers’.
The report, however, said that most domestic currencies across the region depreciated throughout 2018, while the current account deficits continued to rise in several countries, including Bangladesh, India and Pakistan.
It also found that the fiscal deficit in Bangladesh was at a record high, close to 5.0 per cent of GDP, as the country struggled to expand the tax base.
Amid limited trade openness and regional integration, the report found enormous potential for South Asia to gain more share in foreign markets and to participate more decisively in global value chains.