Of Trade and Preferences

Does Preferential Trade Agreements work for Bangladesh?

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Bangladesh being a country which envisages strong relationships with neighboring countries, the country has been reliant on trade for years. Trade makes up a huge chunk of what we see as the economy, at the core. Even though it has been iterated time and again, the truth remains that trade is a source of vital income which Bangladesh is significantly a beneficiary from. For its background, without trade agreements the future would seem grim to say the least. It is evident of that, because the trade to GDP ratio for Bangladesh in 2019 alone was a whopping 36.76%.

Bearing that in mind, it is important to nurture trading agreements to build up future entailing’s. Reasons for that are plenty, while they are designed for a mutual benefit or long term perspectives. Trading agreements may be well equipped during its commencements. But following up, ties may tend to start loosening and the grip slipping away. The core ideas of agreements may conduce consequences which are not so beneficial, rather more problematic to the welfare of the countries. And this has been the case with much of the trades we have harbored for decades.

However, the real question stands whether Preferential Trade Agreements would work in the context of Bangladesh. Given trade is important, and giving certain preferences towards certain trades may yield an efficient outcome. What kinds of possibilities does this enable? And what kind of issues does it bring? To explore this topic, a set of issues have to be addressed along with the ways of bettering the existing Preferential Trade Agreements.  https://ibtbd.net/does-preferentia…k-for-bangladesh

Preferential Trade Agreements may be a stepping stone for future engagements for Bangladesh with countries, to expedite its development and nurture relationships abroad.

Firstly, the definition of Preferential Trade Agreement (PTA) must be understood. Like trade agreements of other sorts, this is no different. It is similar to an agreement, where you reduce tariff and quotas to enable a flow of goods. It makes sure the product is not inflated at a huge price, and that it’s reduced to consumers of those countries. This renders strengthening relationships between countries, and makes mutual gains for consumers of those countries too. But with this distinct agreement called PTA, we are dealing with providing preferential access to certain products. Not all products. This is done by reducing tariffs and not completely abolishing them on the chosen list of products being traded. This has many implications on Bangladesh. The main ones are; which products qualify for this agreement?

To answers this, an example of a PTA can be assessed. In the past, PTAs have been made with Bangladesh. Some famous ones are names we already know of. BIMSTEC is one of them. In a 2017 report, some poor readings were recorded from the Intra-BIMSTEC trade which enabled Bangladesh, Bhutan, India and some other neighboring countries to enter into a PTA. This enabled a trading relationship between India and Bangladesh, at large and also other countries of South Asia. And what it did was, it introduced a host of other issues into the mix. One being, South Asian countries’ infrastructures sometimes disabled quick and efficient flow of trade. And then, the ease of doing business in Bangladesh is quite on a difficult level. Putting all such facts into the equation, it seems as though BIMSTEC has not been operational or effective in their prospective goals for more than 20 years since inception.

If the PTA generates conflicts, rather than reduce and resolve them, it may be that the agreement has failed in itself.

Another example can be analysed. The Intra-SAARC which was made to enjoin trade between South Asian countries including Afghanistan, Bangladesh, Bhutan and more saw similar issues. trade saw some domestic lobbying and political inflictions in their trade. Political relations between certain countries made the entire agenda weak. Large informal trades took place amongst the countries which actually did the opposite of the PTA’s intentions. It bumped the prices up. This goes far off of the real reasons why PTAs are imposed in the first place. If the PTA generates conflicts, rather than reduce and resolve them, it may be that the agreement has failed in itself.

Given these two examples paint a somewhat tough idea of the issues associated with PTAs, let us try to focus on the future implications of such PTAs. Especially in Bangladesh. The most popularly known PTAs Bangladesh has had over the decades were four such very systematically chosen ones. The idea of them was to bridge the gaps between trade of similar regional countries, and to liberalize trade. This was formed to reap maximum benefits of the welfare gains that the PTAs would assimilate. However, due to socio-economic and political setbacks these South Asian countries had somehow impeded some of those benefits. The performance never seemed to reach the ultimate goals. And a lot of the potentials that these countries showed seemed to slowly be stunted due to some of these internal and external factors.

 

Regardless of the situation caused by PTAs, we can still be hopeful that changes are brought about in future implementation of PTAs in Bangladesh. Some good points have been discussed by UNESCAP to better implement them. The below are those such points.

Preferential Trade Agreements may be a stepping stone for future engagements for Bangladesh with countries, to expedite its development and nurture relationships abroad.

Tariff rates to be even lowered- With the trade agreements come lower tariff rates. But, how low is low? It has to be low enough to make trade go smoothly for it to work. In the past it seems as though the PTAs fell short in this aspect.

Export promoting policies to be adopted- Policies designed to promote exports are highly beneficial. Policies which aim at even reducing prices and boosting the economy with essential products, would be a good call as the PTA is imposed. Or other promoting strategies may also be a point to think about. The specially formed policies could create less friction in the trade system between the countries, as evident in other parts of the world.

Harmonizing standards and policies- Harmonizing the difficulties within the trading system is one to look out for. It can bridge future entanglements with the countries in a better light once some root standards and policies are in harmony. Especially if all these countries operate on a similar note as states, emphasizing similar priorities in their policies.

Improve political relations of the states- The removal of political unease is somewhat a given. It can not only shape a better PTA, but the implementation and carrying through of the agreement may run seamlessly. As per previous data shows, political involvements have caused some mayhem between countries even after they settled on their interests.

To conclude, it is important to understand holistically the range of benefits PTAs bring about. Especially for a developing, blooming country like Bangladesh. The relationships that can be fostered with other countries for the future remains a vital reason for execution. It not only vouches for lower prices on goods, but the effects which it carries may help hoist it up from various difficulties. Difficulties which as a developing state alone, Bangladesh may find hard to tackle. Thus, the PTAs which are designed or are in the works have to be made in a way that accords to the needs of all countries. Keeping all of their interests in consideration and harmonizing their wishes. If so, there could be a real win-win out of the PTAs.

For Bangladesh alone, it has potential to flourish it for the coming years in plenty of ways. Much of it may be initially unseen as the PTAs get into implementation. But the goal has to be to bring it out of its difficulties and verge into a future which has in store new and improved possibilities. PTAs therefore, are tools of tomorrow. It should be kept in mind when designing them between the list of mutual countries.

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