WTO Principles and Private Sector in Post-LDC Bangladesh

The World Trade Organization (WTO) was established for a rule-based global trading system for all member nations involved in international trade. This system evolved from the General Agreement on Tariffs and Trade (GATT), established in 1947 following the Bretton Woods Conference. It was eventually noticed that GATT was not sufficiently effective in managing a rule-based system to benefit all member countries, particularly regarding the protectionism practised by both developed and developing nations. The global trade has reached around $22 trillion over the development of a rules-based trading system. The core objective of GATT was to rationalise trade protectionism for an equitable trading culture across the world. However, developed and developing countries often sought to protect their own production system, creating visible challenges that hindered the expansion of cross-border trade and natural participation of all members.

However, the landscape changed significantly with the Marrakesh Agreement with the end of the six-year-long Uruguay negotiation round. This transition gave rise to the WTO, mounting hopes among LDCs and developing nations for a balanced, holistic, and proper trading system covering goods, service and intellectual property. Historically, the WTO has held 14 ministerial conferences, which serve as its highest decision-making body. While early rounds such as those in Singapore and Seattle ended with violence, as a result, it did not create any aspiration for the member countries as a whole. The Doha Ministerial Conference in 2001 stood out as a historic event. It brought about a paradigm shift, increasing the WTO's acceptance and engagement in a functional, rule-based global system.

Most Favoured Nation (MFN) treatment and National Treatment (domestic treatment for international investors and businesses) are two important philosophies of the WTO. While these are the pillars of global trade, Bangladesh, as an LDC, has historically enjoyed exemptions from these principles. Such exemptions are typically reserved for LDCs or those within bilateral free trade agreements and common economic blocs. However, as Bangladesh prepares to graduate from LDC status by 2029, serving as the extended timeline, it faces a significant challenge with economic vulnerability and human development. The current macroeconomic state suggests that the private sector is not yet fully confident in its ability to absorb the impact of a new economic climate that will be vastly open and liberal, different from the existing protective regime. Bangladesh has got the risk of losing almost $17.5 billion in export earnings upon graduation due to trade neutrality and liberalisation and an unusual business climate. The changed economic reality will require a quick turnaround, as it may limit the current growth spree.

As Bangladesh approaches the LDC graduation, it must move towards an open and competitive market. This requires resilience to navigate the transitional period. Currently, the RMG industry dominates the export market, contributing 75% to 80% of total exports. However, MSMEs are equally vital, contributing nearly 30% to the GDP, whereas the RMG sector’s total share of the GDP is around 15%. Balancing these sectors is essential. Post-graduation, the MFN treatment will no longer allow for a protective regime. Bangladesh will be required to withdraw protective export and import tariffs to ensure a level playing field. Both local and foreign investment will require a smooth and even atmosphere in terms of fiscal and non-fiscal incentives, which may squeeze local investment and growth of MSMEs in the local value chain. We need to see the whole economy as the agenda of graduation instead of the lens of a few billion-dollar export industries, as the entire economy is to meet the upcoming change. Bangladesh must keep its markets open and remain highly competitive. The country must establish a fair, transparent, and equitable trade infrastructure, tariffs, trade benefits, and overall business environment that equally supports a fair, transparent, and level playing field in trade infrastructure, tariffs, trade benefits, and the overall business environment, equally supporting both local and foreign investors.

Upon graduation, Bangladesh must reduce its agricultural subsidies to below 5%. This policy means losing the ability to provide cheap fertiliser, subsidised loans, and low-cost utilities, other benefits to stakeholders which may be contested by competing agro-exporting nations. 

So, Bangladesh’s readiness for graduation must extend beyond the large manufacturing sector. The government and stakeholders need to consider the entire economy, including the informal sector and CMSMEs, which represent a significant portion of economic activity. Emerging and nascent industries will require policy support, yet this support must be designed carefully to avoid discouraging foreign investment or creating trade and policy imbalances. We need to revise upcoming facilities and policies across the board of the economy, ensuring a balanced and predictable environment for existing, emerging, and established industries in Bangladesh. Non-Agriculture Market Access (NAMA) and deregulation are also pivotal. Deregulation should aim for rationalisation and simplification of business constraints and challenges, but it must be backed by a coordinated, predictable, and pragmatic policy ecosystem, institutional reforms..

The private sector remains the absolute lifeline of the economy and must be the core point of attention in all policy contexts. Bangladesh must address critical macroeconomic challenges such as poverty, unemployment, hunger, and socioeconomic inequality through making a competitive private sector ecosystem upholding IPR practice and a free and liberal economic culture. And all concerned stakeholders, including the government, trade bodies and other stakeholders, should exert concerted efforts on these pressing issues.
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The writer is macroeconomic policy researcher and analyst