As expected, US President Donald Trump scrapped the Trans-Pacific Partnership (TPP) by an executive order just after taking over as new president. Interestingly, Zahid Hussain, World Bank economist stationed in Dhaka, suggested in an interview with The Daily Star, “If the TPP is not signed it will be a piece of good news for Bangladesh. But it is not good news for world trade because it will weaken the foundation of the multilateral trading system”. Similar observations can also be found in the press and media. The question is: is the decision of the US administration indeed good for Bangladesh? The remarks made by WB economist have two interesting elements: i) ‘not signing the TPP will be good news for Bangladesh’ and ii) ‘MTS (Multilateral Trading System) will be weakened’.
In the post-war global order, the big powers led by US created GATT (General Agreement on Tariffs and Trade). In January 1995, WTO was established as a rule based organisation for the MTS for fully liberalised and globalised trade.
Brazil, India, China and other developing countries made huge strides benefitting from the Special and Differential preferential treatment offered to developing countries under WTO. In the wake of the last global economic downturn, the US and others have started arguing that the emerging economies (BRICS countries) have grown more rapidly than the rest of the world (though these economies have also been experiencing slowing down). And, the emerging economies should make ‘commensurate contributions to the liberalisation of world trade’. Conversely, emerging economies argued that they are still developing countries. They need to be shielded through appropriate ‘Special and Differential Treatment’ and ‘Special Safeguard Mechanism (SSM)’ for their interests under WTO.
The big players, including the US, couldn’t make any headway trying to promote their interests in the negotiations in WTO. Essentially, there has been no substantive progress in the Doha Development Agenda (DDA) negotiations. In fact, critics suggest DDA a ‘dead round’.
In recent years, some founding leaders created strategic Regional Trading arrangement — TPP — undermining the existing universal Multilateral Trading System created by them in 1995. Among developing countries and LDCs, TPP have been widely considered a parallel mechanism of MTS and manifestation of ‘protectionism’ and against globalisation.
WTO Director General, Mr. Roberto Azavedo, at the joint annual meeting of WB and IMF in Washington last October urged for “new globalisation push” against the “growing threats of protectionism”.
TPP, either signed by the US or otherwise, will not serve the interest of countries like Bangladesh. The US, during DDA negotiations, was not found fully sensitive towards the interests of LDCs, particularly duty-free-quota-free (DFQF) market access to the US.
Both Republican and Democratic administrations did not find much interest in giving equal treatment to all LDCs while offering preferential market access to the US. They maintained a clear African LDCs favoured package like African Growth and Opportunity Act (AGOA).
Scrapping of TPP can definitely not be considered as weakening of the MTS. Twelve member states of TPP would together represent 40 percent of world trade. LDC groups represent merely 1 percent of world trade. With the US withdrawal from TPP, countries like Bangladesh cannot rejoice. White House Press Secretary Sean Spicer already stated, “This executive action ushers in a new era of US trade policy in which the Trump administration will pursue bilateral trade opportunities with allies around the globe”, which is a clear manifestation of a protectionist stance. Trump did not indicate that his administration would give special attention to LDCs and help their mainstreaming into the MTS and their early graduation. And there is no mention that DDA should be concluded on a fast track basis.
Interestingly, some members of BGMEA were found very relieved as Vietnam will be directly affected by the scrapping of TPP by the US. As a member, Vietnam might be genuinely concerned. But Vietnam is a reality for Bangladesh. TPP or not, it will continue to grow fast and will take the bigger pie of the US market for garments with its consistent open door and export led policies attracting phenomenal growth of FDI, which is a dream for any LDC. On the other hand, Bangladesh’s graduation to Middle Income Country from LDC itself will be a big challenge. Bangladesh cannot continue with a duty-free-quota-free market access for long. It has to find its way to be competitive. And, BGMEA is expected to be prepared for diversifying tariff lines and markets with much required efficiency and compliances.
Bangladesh, as a member of the LDCs bloc has immensely benefitted from the MTS. Among all LDCs, it fully exploited the preferential regime of MTS and built a phenomenal garments and textile sector, created millions of jobs and thus reduced poverty and made the poor and women empowered. Another stunning success is the pharmaceutical sector. Bangladesh took the full benefit of TRIPS flexibility for pharma products under WTO. Definitely, the government played a catalytic role in making the garments and pharma products globally competitive. And, the economy has now visibly turned around with a positive image.
Given the ground realities and emerging global trading scenario, Bangladesh should continue its engagements being fully committed to MTS. We should also engage with the new US administration with well-researched statistics and arguments, proving how the suspension of GSP facilities has negatively impacted Bangladesh and that the US should revisit the GSP issue for Bangladesh. Trade bodies should also be immediately forthcoming in finding innovative ways to buttress the government’s engagement with the US administration.
