Bangladeshi exporters will continue to enjoy preferential access to the UK market after Bangladesh graduates from the least- developed-country status, the United Kingdom has assured.
Economists say the UK’s decision provides Bangladesh with valuable policy space and greater certainty on the cusp of transition from the world’s poor-country club.
A letter from the British mission in Bangladesh says 92 per cent of goods will continue to qualify for duty-free access without the need for Bangladesh to negotiate a separate trade agreement with the UK.
The letter, dated August 19, from James Goldman, Deputy High Commissioner and Development Director at the British High Commission in Dhaka, was sent to Md Ataur Rahman Khan, Secretary of the Ministry of Commerce.
Bangladesh currently enjoys tariff-free access for 99.8 per cent of goods exported to the UK under the UK’s Developing Countries Trading Scheme (DCTS).
According to the communication in writing, Bangladesh will retain its existing market access for three years after its LDC graduation, providing exporters with a transition period before moving to a new preferential arrangement.
Following the transition period, Bangladesh will move to the Enhanced Preferences tier of the DCTS, under which 92 per cent of goods will continue to qualify for duty-free access without requiring further renegotiation.
Commerce ministry’s senior officials have said apparel and readymade garments are within the 92-percent duty access list, so reduction in ratio won’t affect Bangladesh’s export.
Talking to the FE on Thursday, Commerce Secretary Md Ataur Rahman Khan termed it a significant assurance allowing Bangladesh to increase its capacity, diversify export and find new market.
“We hope to get three years’ extension to stay as LDC until November 2029, so the existing duty benefit will remain unchanged for next three years,” he said.
Trade economist Dr Masrur Reaz also takes it as a significant massage from the British High commission that would give a huge comfort to the apparel exporters.
Dr Reaz, chairman of the Policy Exchange Bangladesh, says when all other countries’ preferential-trade benefit will expire with the LDC graduation, the UK will retain it.
“The letter made it clear that there is no expiration date of UK’s preferential trade benefit,” he says.
In this period, he suggests, Bangladesh must act seriously to sign free-trade agreements with the major trade partners to retain the trade benefits to avail after LDC graduation.
In the letter, the British government has also provided specific reassurance to Bangladesh’s garment sector, the country’s largest export earner.
Dr Mohammad Abdur Razzaque, Chairman of Research and Policy Integration for Development (RAPID), finds this as a welcome news for Bangladesh as it prepares for LDC exit.
“The UK has provided considerable certainty by confirming that Bangladesh will retain its existing market access for three years after graduation and will then move directly into the Enhanced Preferences tier of the DCTS.”
For Bangladesh, he says, the most important aspect is the treatment to garments, which account for the overwhelming majority of the country’s exports to the UK.
“Market access for garments will remain unchanged under the Enhanced Preferences arrangement.”
Equally important are the UK’s revised rules of origin, which provide substantially greater flexibility in sourcing imported inputs and do not impose a double-transformation requirement.
This is particularly relevant for Bangladesh’s garment industry, given its dependence on imported fabrics and other intermediate inputs in several product categories, Dr Razzaque further notes.
It is also important to recognise that the UK Government introduced these changes to its rules of origin autonomously.
“The changes, therefore, demonstrate the UK’s recognition of the adjustment challenges facing Bangladesh and other graduating LDCs, while providing particularly important benefits for Bangladesh because of the scale and composition of its exports to the UK.”
This is a positive example of how major trading partners can support a smoother LDC transition, he has said.
The combination of the three-year transition period, subsequent access to Enhanced Preferences, and more liberal rules of origin considerably reduce the immediate market-access risks associated with Bangladesh’s graduation.
“Preferential access by itself cannot guarantee export growth. The priority should be to improve competitiveness, diversify products, make effective use of the more flexible sourcing provisions, and ensure that exporters understand and utilise the DCTS rules,” he suggests.
The challenge for Bangladesh is to translate that opportunity into stronger and more diversified exports, economist observes.
Market access for garments covered by chapters 61 and 62 will remain unchanged under the Enhanced Preferences tier, according to the letter.
The updated rules of origin will also ease compliance requirements for garment exporters.
They will no longer be required to meet the existing “double transformation” requirement to qualify for preferential market access.
The new rules will provide exporters with greater flexibility to source inputs from a wider range of countries while retaining eligibility for preferential tariffs.
The UK is one of Bangladesh’s major export destinations, particularly for readymade garments.
The continuation of preferential access is, therefore, considered important for maintaining the competitiveness of Bangladeshi products following graduation.
The British High Commission will also work with the Export Promotion Bureau (EPB) to organise a series of workshops for exporters and other trade stakeholders.
The workshops will focus on helping businesses better understand and utilise the benefits available under the DCTS, the letter reads.
Garment export to the UK registered .91-percent growth in the last fiscal year while it was negative 3.31 per cent in total EU zone.
Source: https://thefinancialexpress.com.bd/economy/bd-to-retain-duty-free-mkt-access-to-uk-after-ldc-exit
