The Crucial Role of Trade Facilitation in Bangladesh’s Export Competitiveness
The global trade landscape presents a significant challenge for Bangladesh, particularly regarding its main export, ready-made garments. High import tariffs in major markets like the EU, Canada, Japan, and the USA pose a hurdle, especially given the upcoming LDC graduation and erosion of preferential market access. To maintain and enhance its export competitiveness, Bangladesh must prioritize improving its trade facilitation mechanisms.
The Impact of High Import Tariffs
Ready-made garments are faced with disproportionately high tariffs in international markets. While average tariffs for goods in the EU, Canada, Japan, and the USA generally range between 3% and 5%, apparel tariffs are significantly higher, typically between 10% and 15%. This discrepancy, coupled with the loss of preferential access in most major markets, elevates export prices and undermines the country’s competitive position.
The Overlooked Trade Facilitation Issue
Trade facilitation is equally critical, though often underappreciated, in driving export competitiveness. It encompasses modernizing trade processes, such as digital trade, electronic documentation, automated clearance, and efficient electronic exchanges of information throughout the supply chain. Weak trade facilitation acts as a hidden tax, escalating export costs and eroding the competitive edge of Bangladeshi exporters.
Benefits of Efficient Trade Facilitation
trade facilitation can address the high costs and inefficiencies in moving non-apparel products, which face lower tariffs globally but are hampered by logistical barriers. Exporters of diverse products struggle with time delays and rising costs, which hinder competitiveness. Apparel exporters fare better due to preferential duty-free access in most markets.
Current Trade Cost Disparities
A study by the UN ESCAP-World Bank indicates that trade costs between Southeast Asia and South Asia are 130% of tariff equivalents, higher than ASEAN-EU or SAARC-USA linkages. An additional World Bank report from 2020 noted that exporting from Dhaka to Kathmandu is 1.8 times more expensive than to São Paulo, Brazil. Bangladesh’s internal delays add to these costs. The NBR’s 2022 study found average sea cargo clearance times of 11.1 days, compared to more competitive alternatives.
The Urgency of Cost-Effective Trade Facilitation
The World Trade Organization’s Trade Facilitation Agreement (TFA) outlines measures to reduce trade costs and boost global trade by up to one trillion USD. Full implementation can lead to a 14.3% reduction in costs, surpassing benefits of tariff preferences. As an LDC, Bangladesh enjoys flexibility but must transition to full compliance with TFA for developing nations. Non-compliance risks disputes and penalties at the WTO Dispute Settlement Body.
Strategic Actions Needed
To improve regional access, prioritizing BBIN Motor Vehicle Agreement implementation, enhancing railroad and maritime connectivity, and advancing BIMSTEC strategy is essential. Strengthening the BCIM Economic Corridor also offers significant opportunities. The Framework Agreement on Facilitation of Cross-border Paperless Trade in Asia and the Pacific needs urgent implementation.
Green Trade Facilitation: A New Norm
Global trading partners increasingly emphasize Green Trade Facilitation (GTF), requiring reduced carbon footprints. Adopting GTF can position Bangladesh ahead of trends while avoiding protectionist measures. Continued engagement in global discussions is crucial.
Conclusion: Embracing Trade Facilitation
As Bangladesh prepares for LDC graduation and shifting market dynamics, trade facilitation emerges as a priority. Policymakers, ministries, and trade bodies must expedite initiatives to improve trade efficiency. Reducing trade costs will be vital in maintaining Bangladesh’s competitive edge in the global market.
By focusing on these areas, Bangladesh can position itself for sustainable growth and export success.
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