Extensive preparation to deal with LDC graduation is a must

06 March 2021

DISCUSSANTS at a seminar on Thursday said after Bangladesh's graduation from LDC status in 2026, the country would lose duty free market access to EU and other big traditional export markets and it alone would account for almost 90 percent of trade loss that all 12 countries graduating on this occasion would face. Average tariffs on Bangladesh-made apparels will go up by 10-15 percent when Vietnam, a key competitor will enjoy duty-free access to markets of Canada, Australia, China, Japan and the European Union. Bilateral and regional free trade agreements and engagement in trade blocks will give Vietnam a competitive edge. In the new situation a shirt made in a Dhaka factory would be 20-25 percent costlier in export markets than one shipped from Vietnam.
The question is how Bangladesh should be able to deal with the reality. The seminar organized by CPD has rightly recommended that the country must drastically improve its competitiveness and use all resources and skilled manpower to increase productivity, particularly of value added products at low costs. For Bangladesh the impact of graduation would essentially be on apparel exports and we must have all preparation from now to face the situation. .  
We would say Bangladesh must open tough negotiations bilaterally and also with regional trading blocks such as ASEAN to enter into free trade or preferential trade deals to keep our exports unimpaired and to grow further. It is true that the opening of the economy under reciprocal free trade would challenge many local industries with poor competitiveness to stay in business. The country may also immediately lose up to US$ 5.37 billion in export earnings as per the report. The government revenue loss would also be enormous because of lower tariff.
But we believe with the restructuring of the country's manufacturing base and rise in competitiveness, Bangladesh economy would reach a new height with the inflow of huge foreign investment. The trade loss may be temporary. But we would say we must have a competent government to prepare the nation instead an inept one that may cause setback on the way.
Discussants have rightly suggested extension of present duty free facility up to 2031 so that we can recalibrate our manufacturing system. 

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