Bangladesh and Japan have largely agreed to sign a free trade agreement (FTA) to boost trade and investment, Commerce Minister Tipu Munsi said yesterday.
“Bangladesh and Japan are willing to sign an FTA,” he told the Daily Star by phone. The ministers are expected to issue a joint statement on the signing today at a meeting at the Ministry of Foreign Affairs.
Follow the Daily Star’s Google News channel for all the latest news. This is the first formal meeting to sign the FTA and both sides believe it is possible to sign a win-win agreement, the minister said, adding that no specific date has been set for the signing. I added no.
“We are still in the early stages of signing an FTA…our team has been working with the Japanese team to negotiate,” Munshi said.
Bangladesh has been negotiating with several trading partners to sign FTAs, Preferential Trade Agreements (PTAs), Comprehensive Economic Partnership Agreements (CEPA) and Comprehensive Economic and Trade Partnership Agreements (CETA).
These are mainly aimed at preserving Bangladesh’s preferential trade benefits after Bangladesh is downgraded from least developed to developing country in 2026.
Last year, the country’s total exports exceeded $52 billion, more than 73% of which was induced by the GSP, so preserving the benefits of preferential trade is important.
In other words, over 73% of the country’s exports were under preferential tariffs as Least Developed Countries (LDCs).
However, LDC trade benefits will end in 2026 for countries graduating from LDC and in 2029 for the European Union (EU). This is because the EU offers him a three-year grace period to prepare for graduation.
Trade experts and analysts said the erosion of preferential trade could affect more than $7 billion in exports from Bangladesh.
This is due to the fact that local exporters face tariffs of 9% or more on shipments of goods to various countries other than the United States after graduating from LDC.
Another line of thinking, however, is that Bangladesh’s exports will remain unaffected after graduation as local garment exporters are doing well in the US market.
It faced one of the highest tariff rates of 15.62% to the US, where garment shipments increased by 50% last year. This proportion continues today.
Moreover, Bangladeshi commodities are still competitive in terms of price compared to commodities from other countries.
For example, if a Bangladeshi garment sells for $2 to the EU, EU retailers and brands are buying the same item for $5 or more per piece.
This shows that there is still room for negotiation on prices for Bangladeshi exporters, experts said.
As such, Bangladesh’s exports may remain unaffected after the LDC’s graduation, they added.
Japan is the first Asian country in which Bangladesh’s annual shipment value already exceeded $1 billion about 10 years ago, supported by garments.
According to a survey conducted by the Japan External Trade Organization (JETRO) in June this year, more than 85% of some 338 Japanese companies operating in Bangladesh agreed to sign an FTA to promote bilateral trade and investment. want to conclude.
According to survey results, the two governments have started negotiations to conclude an FTA.
A memorandum of cooperation was expected to be signed during Prime Minister Sheikh Hasina’s visit in November this year, but unfortunately the tour has been postponed.
According to Export Promotion Bureau (EPB) data, Bangladesh exported goods worth US$1.35 billion last year, up 14.40% from the previous year. Of that, $1.1 billion was from clothing.
A Japanese Special Economic Zone in Alaihazar, Nayaranganj was inaugurated on December 6 to promote Japanese investment in Bangladesh.
Garment shipments from Bangladesh to Japan started to surge after April 2011 when Japan relaxed its rules of origin for the least developed countries and the knitwear sector.
Until now, Japan has not allowed zero tariffs on knitwear shipments to protect its own knitwear sector.
Recently, Japanese Ambassador to Bangladesh Naoki Ito said that by 2030, apparel shipments are expected to increase tenfold to reach $10 billion.
Bangladesh mainly imported $2.34 billion worth of capital machinery, textiles and clothing accessories, food and beverages, logistics materials and household appliances from Japan last year.
Md Anwar Shahid, secretary general of the Japan-Bangladesh Chamber of Commerce, said he hopes an FTA will be signed between the two countries as soon as possible.
“If an FTA is signed, there is a huge potential for increased trade with Japan,” he told the Daily Star by phone.
