Diversification of products needed to tap benefit of duty-free access to China

20 October 2020

In a bid to entice Bangladesh, China has provided a huge trade boost to the country by announcing duty free benefit for 97 per cent of Bangladeshi products to its market effective from July 1 while Dhaka termed it as a success of its economic diplomacy.
However, Bangladesh is still not being able to reap the tariff exemption in the Chinese market to the fullest extent as more than one-third of its readymade garment exports (RMG) to that country is subjected to payment of duty yet. There was anticipation that Bangladesh's exports to China would see a sharp rise. But it has not happened so far, economists and exporters said.
Media report in a national daily on Monday said that prior to the trade facilities being granted, Bangladesh used to enjoy the similar privileges for 60 per cent of its products under the Asia Pacific Trade Agreement (APTA) arrangement, where Bangladesh is a founding member. Then 3,095 Bangladeshi products were eligible for duty-free access in Chinese market. Later, 5,161 Bangladeshi products were included to enjoy zero-tariff treatment as a Least Developed Country (LDC).
As reported, Bangladesh Garment Manufacturers and Exporters Association's total RMG export to China in the financial year 2018-19 was $507 million. Of the amount, $308.4 million was under duty-free facility. It said the country would have to add 40 per cent value to get duty-free benefit in China, which would be challenging for the exporters to comply with the new rules of origin.
Meanwhile, experts suggested that for the sake RMG, 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.  Bangladesh could also request the UN not to recommend any country for graduation based on the 2021 review.
Instead, Bangladesh could ask for a proper review later may be in 2024 by when the impact of Covid-19 could be clear.
Experts suggest that the RMG sector would have to make diversification to tap the full benefit of duty-free market access to China. However, the way outs is not as smooth as it used to be. Mounting competition in the industry is making it more and more difficult for businesses to survive with rising costs and associated risks.

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