Bangladesh RMG’s achievements from APTA

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Bangladesh RMG’s achievements from APTA Significance of APTA The Asia-Pacific Trade Agreement (APTA), formerly known as the Bangkok Agreement, was signed in 1975 under one of the major initiatives taken by United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP) [1].

Figure 1: Bangladesh RMG is employing around 4.2 million people most of them are women. Six Participating States- Bangladesh, China, India, Lao PDR, South Korea, and Sri Lanka are the parties to the APTA. The APTA pact does occupy market for 2921.2 million people [2] and the size of this big market accounts US$ 14615.86 billion in terms of Gross Domestic Product [3] (GDP) in the Fiscal Year

(FY) 2015-2016. APTA’s key objective is to hasten economic development among the six participating states opting trade and investment liberalization measures that will contribute to intra-regional trade and economic strengthening through the coverage of merchandise goods and services, synchronized investment regime and free flow of technology transfer [4] making all the Participating States to be in equally winsome situation. Ubiquitous RTAs and APTA In Bangladesh context, APTA principally implies to boost export in association with other participating states, as if, firstly, Bangladesh could not seal down any single bilateral Free Trade Agreement (FTA) with any country although noticeable steps were opted by Bangladesh Tariff Commission (BTC) under the guidelines of Ministry of Commerce (MoC) at somewhat extents to carry out preliminary studies regarding China, India, Malaysia, Pakistan, Sri Lanka and Turkey and launching negations with some of them[5.6]. Secondly, APTA is one of the two active Regional Trade Agreements (RTAs) for Bangladesh subsequent to South Asian Free Trade Area (SAFTA) despite the fact that RTAs have become increasingly ubiquitous since the beginning of 1990s and as of 1st July 2016, some 635 announcements of RTAs have been received by the General Agreement on Tariffs and Trade (GATT)/ World Trade Organization (WTO). Counting goods, services and accessions separately, of those, 423 are in force at present [7]. APTA becomes more important in the context of TPPA Perhaps, in this prevailing stretched international trade regime, following the Trans-Pacific Partnership Agreement (TPPA) signed among 12 countries- the United States (US), Japan, Malaysia, Vietnam, Singapore, Brunei, Australia, New Zealand, Canada, Mexico, Chile and Peru that collectively have population of about 800 million and is responsible for 40 percent of world trade [8], and when the European Union (EU) experienced Brexit result in the poll on 23 June, 2016 trembling entire zone [9], while just after British Pound Sterling (GBP, £) got depreciated by 17 percent in a quick against of Bangladeshi Taka (BDT, ৳), now at present,

Bangladesh should focus on APTA as 4 th round negotiation has already taken more than a decade and seems to be concluded in near future. Bangladesh to propose a Concession List in APTA

Figure 2: India’s annual RMG imports from Bangladesh. Data Source: ITC Trade Map, 2016 [11] Data Calculation and Illustration: Latifee, E. H., 2016. The fact is that APTA still has bundle of facilities to offer that would assist Bangladesh maintaining export earnings to grow steadily and ensuring sustainable development that Bangladesh is paving into, in line with United Nations’ (UN) initiated Sustainable Development Goals (SDGs). But it should not be forgotten that Bangladesh earns 94 percent of the total export earnings through only six items [10] including garments, jute and leather, so the country should frame and negotiate with the offered and demanded concession lists that are going to be announced by other participating states at next APTA high level meetings with a view to leaving a healthy business environment for the manufacturers and exporters of those six items. In addition, APTA Concession Lists are split into two categories, i.e., General Concessions’ and ‘Special Concessions’.

RMG trade between APTA member states and Bangladesh To state, Bangladesh Ready-Made Garments Industry (BRMGI) is the strategic sector for the country that has beefed up US$ 28.09 billion, i.e., 82.05% of total export in the FY 2015-16 (EPB, BKMEA, 2016). It has proved to be the lifeline of Bangladesh that employs more than 4.2 million workers and contributes to the country’s GDP at 14.11%. In context of the APTA region, BRMGI plays a vital role by earning foreign currencies from China, India, South Korea, and Sri Lanka, hence, this article intends to prescribe how Bangladesh can uphold stable positive export growth in this region further. In accomplishing so, this article firstly, analyzes the imports of RMG by these countries from Bangladesh in recent years; secondly, recent variations in growth of RMG exports of Bangladesh to the World has been taken into account; thirdly and finally, recommendations are made to instigate BRMGI’s growth. RMG imports by China from Bangladesh at Calendar Year (CY) 2015 and CY 2014 grew by 27.23% and 44.73% respectively (e.g., calculated from the ITC Trade Map data) indicating that China is going to be a very stable and potential market for Bangladesh RMG products in which the latter country has competitive advantages provided that if the APTA Concession list is made in favor of Bangladeshi RMG sector, i.e., that would minimize the external market and value chain risk in case of Bangladesh. India’s RMG imports from Bangladesh at CY 2015 and CY 2014 increased by 18.15% and 29.58% respectively [12] indicating that Indian market is also following the same trend alike China’s one so that the same inference applies to the Indian market. In addition, though India has privileged Bangladesh in their market under South Asian Free Trade Area (SAFTA) Agreement but due to heavy non-tariff barriers (i.e., countervailing duties) imposed, Bangladesh is still lagged behind far away from capturing the market as the country could in optimal way if there was no such barrier existed. From ITC Trade Map, there is no data found that could tell us what amounts of RMG imports were conducted by Lao PDR from

Bangladesh in recent years, signifying that there is a huge unexplored market comprised of 6.82 million people that can be reached through APTA with basic RMG items produced by Bangladesh. In CY 2015 over the CY 2014 the growth rate of Korea RMG imports from Bangladesh increased to 18.41% while in CY 2014 upon CY 2013, the annual growth rate was 18.80%[12], so that Korean RMG market provides a strong indication being remained as stable one for Bangladesh alike previous years. Sri Lanka’s RMG imports from Bangladesh in the CY2014 experienced heavy negative growth, i.e., -48.26%, however in CY2015 the growth narrowed to -5.39% [12]. To explain that why the bilateral trade turned negative in terms of RMG import by Sri Lanka from Bangladesh can be done at the level best with the reference to Table 1. Here, it is seen that APTA Region’s RMG imports from Sri Lanka whooped up during CY2014 and CY2015 by 28.91% and 21.07% consequently. This pattern of trade again reminds us that Sri Lanka is die-hard competitor to all RMG exporting countries particularly to Bangladesh in this region alike other continents or regions.

Figure 3: APTA Region RMG imports from Sri Lanka in Thousand US$. Data Source: ITC Trade Map, 2016 [13]. Data Calculation: Latifee, E. H., 2016. FTAs with India and China would help Sri Lanka As far it is learnt, beyond the reach of APTA Agreement, Sri Lanka has already bilateral FTA with India and tending to finalize FTA with China. It is believed from the international trade history that, FTA boosts the trades in between and the

same applies to Sri Lanka and APTA Region. In this way, if Bangladesh can expand its strategic movement to seal down such FTAs with Sri Lanka, then as labor is cheaper in Bangladesh then it could be expected that Sri Lanka will import more and more RMGs from Bangladesh and re-export to India, APTA Region and other countries where Sri Lanka has easier access and relaxed rules of origin to face. APTA member countries are competitors for Bangladesh in rest of the world Well, beside established RMG items that do earn chunk of foreign currencies through exports, Bangladesh do have at least 215 RMG products in which the country is experiencing positive and negative growth rates varying on the calendar years in terms of export earnings, this indicates firstly, that Bangladesh has high competitive advantages at some RMGs meanwhile, in manufacturing some other RMGs, the country is in the way of gaining competitive advantage comparing to its competitors, i.e., India, China and Sri Lanka. Secondly, the positive and negative growth rate in export earnings from exporting these 215 RMGs happened due to some internal and external (i.e., favorable and adverse, respectively) market and supply chain factors. Recommendations The findings of this article regarding the varying growth of 215 RMGs suggest that firstly, all of these should be wiped out from the APTA Concession List from Bangladesh side if any of these are included at any level of the study conducted by the country itself. Secondly, Bangladesh is gaining competencies in these 215 RMGs so that efforts should be put to negotiate with the APTA Participating States for making them to include all these RMGs in their Concession Lists. Thirdly, as if Sri Lanka is in advantageous situation occupying FTA with India and tending to seal done FTA with China so that Bangladesh should focus on Sri Lanka more with a view to negotiating with them especially about these 215 RMGs which would open a new way between Bangladesh- Sri Lanka beyond APTA by launching FTA negotiations further. Fourthly, still now Lao PDR is unexplored, hence, Bangladesh should make

effective negotiations and progresses under APTA to improve bilateral trade with Lao PDR. Fifthly, Bangladesh can initiate advocating about wiping out non-tariff barriers (NTBs) completely in louder voice by focusing on NTBs relation and obstructive role to achieve sustainable development within the region as if APTA also considers NTB [16] to eliminate though there are less visible outcomes observed till to the date. References: [1] http://www.unescap.org/apta [2] Calculated from the data of World Development Indicators (WDI)- World Bank (WB), 2016. [3] Calculated from the Country Bureau of Statistics and WDIWB, 2016. [4] http://www.unescap.org/sites/default/files/04_FA%20on%20Trade% 20in%20Investment.pdf [5] https://aric.adb.org/fta-country [6] http://www.thedailystar.net/business/fta-malaysia-year-tofail203815 [7] https://www.wto.org/english/tratop_e/region_e/region_e.htm [8] http://www.bbc.com/news/business-32498715 [9] http://www.bbc.com/news/uk-politics-32810887 [10] http://www.thedailystar.net/business/fta-studies-way-73168 [11] http://www.trademap.org/Bilateral_TS.aspx [12] Calculated from the ITC Trade Map data [13 ]http://www.trademap.org/Bilateral_TS.aspx [14] http://www.unescap.org/apta/ntm-database

About Author:

Enamul Hafiz Latifee, the writer is Senior Assistant Secretary, Research and Development Cell, Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA). He can be reached at: [email protected] or [email protected]

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