Govt angling for free trade with EU

Bangladesh is seeking to sign free trade agreements with the European Union and other major trading partners to retain preferential access after graduating from the least-developed country category in November next year.

The commerce ministry sent a letter to the EU last month expressing interest in an FTA and has convened an internal meeting for September 29 to discuss the issue, Commerce Secretary Mahbubur Rahman told The Daily Star over the phone.

“Securing this trade deal is important as two competing countries — India and Vietnam — have already signed FTAs with the EU,” he said.

Without a similar arrangement with the EU, Bangladeshi exporters will face a 12 percent duty from 2029 as the bloc has granted the country a three-year extension of zero-duty facilities.

The EU accounts for more than $25 billion in annual shipments from Bangladesh, or over 60 percent of total exports.

Meanwhile, Bangladesh has been pushing for EU’s GSP Plus status, which requires ratification of 32 international conventions, including four on good governance, labour rights, human rights, and environmental protection.

Since obtaining GSP Plus appears to be difficult now, signing an FTA could be a possible solution.

The UK has also extended duty-free access for Bangladesh until 2035 under its Developing Countries Trading Scheme, with a 25 percent local value addition requirement. Therefore, Dhaka is not seeking an FTA with Britain now.

Australia, too, has assured duty-free benefits after graduation but requires 50 percent local value addition — a condition difficult for apparel exporters reliant on imported raw materials.

Rahman said he would write to Canberra next week, requesting the threshold be reduced to 30 percent, in line with the EU.

Meanwhile, Bangladesh has concluded the final round of negotiations with Japan on September 13, paving the way for an Economic Partnership Agreement (EPA) to be signed soon.

Talks with South Korea are also advancing: the first round of negotiations on a Comprehensive Economic Partnership Agreement (CEPA) was completed in Seoul last month, with the deal expected to follow.

In addition, the ministry sent a proposal to Canada last month to begin FTA talks, though Ottawa has yet to set a date. Officials are in contact with the Canadian High Commission to schedule discussions, Rahman said.

Dhaka has also been lobbying to join the Association of Southeast Asian Nations (ASEAN) and the Regional Comprehensive Economic Partnership (RCEP), and the commerce ministry is forming a dedicated trade negotiation team to pursue deals with major trading partners and blocs.

Despite these initiatives, Bangladesh’s success in concluding FTAs has so far been limited.

The only signed trade deal is a Preferential Trade Agreement (PTA) with Bhutan, covering $22 million in bilateral trade, inked in December 2020.

Negotiations with India on a CEPA were completed more than two years ago but the deal remains unsigned.

The date has not been fixed yet to sign a trade deal with the US as well, the secretary said.