Monday, 23 May, 2022
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China Offers “Zero-Tariff” Access for 98% Bangladeshi Products

Nandita Roy

Recently, China has declared to grant duty-free access to 98 percent of Bangladeshi products including 383 new products, especially leather and leather-made goods, in this "zero-treatment" list. This decision from China, the largest Asian Economy, will increase the number of Bangladeshi products, enjoying the "duty holiday" facility, to 8,930. It is the need of the hour to analyze why China has offered such preferential treatment to Bangladesh and how Bangladesh could reap optimum benefits from this “zero-tariff” facility.

The journey of Bangladesh and China relations began with China’s recognition of Bangladesh as a sovereign nation-state on 31 August 1975. Since then, they have been maintaining a very cosy friendship. Common membership in the BCIM forum and Bangladesh’s decision to join BRI in 2016 reflect that they have a common interest in the global geopolitical context. Apart from economic assistance and defence cooperation, China extended its hand to support Bangladesh on different international platforms as a time-tested friend. For instance - when the World Bank refused to finance Bangladesh’s flagship project “Padma Bridge”, at that time China came forward with an offer to build the bridge covering 70 percent of costs. Though Bangladesh decided to build the bridge with its own fund, still China proved itself as an “all-weather ally” of Bangladesh holding its hands in its difficult times. The recent decision of China to ensure the preferential treatment of 98 percent of Bangladeshi products is another “token of friendship” from China to Bangladesh.

The two-way trade between these two countries crossed $13 billion in FY 2018-19 where China’s export to Bangladesh was US$13.6 billion, one-fourth of the latter’s total import expenditure, and Bangladesh’s export to China was only US$0.56 billion. This shows a huge trade deficit for Bangladesh and a colossal trade surplus for China. As the bilateral trade tilted heavily towards China, this leads the critics to give a contentious look on this decades-long bonhomie between these two countries. As an economic giant, China decided to create a level playing field for Bangladesh by providing the aforementioned special treatment for 8,930 Bangladeshi products.

In FY 2019-20, China imported US$2.4 trillion worth of goods where Bangladesh’s portion was only 0.05 percent demonstrating the huge trade scope that existed in the Chinese market for Bangladesh. A Bangladeshi scholar, Dr. MA Razzaque, Head of Research and Policy Integration for Development, showed in one of his research that if Bangladesh can grab only 1 percent share of China’s market, then it could earn US$25 billion. China understands that as an LDC Bangladesh lacks the institutional capacity to avail benefits remains untapped in China’s market. To assist Bangladesh in becoming competitive and getting easy access, China has offered “zero-tariff” preferential access for Bangladesh.

In 2020, China offered 97 percent “duty-free” facility to Bangladeshi products, and a total of 8,547 Bangladeshi products was considered as eligible for such facility. Leather goods, the second-largest export earner to Bangladesh and a major exportable item to China were not included in the preferential list prepared by China at that time. Critics used to say, mentioning the exclusion of leather-made goods from the list that China was providing preferential treatment to those products that were not exporting in large volumes from Bangladesh. Critics argued that the products that hold the major share of Bangladesh’s export to China, e.g., leather goods, were wisely excluded from the list. But this time, China has decided to include the leather goods in that list which is not only a blessing for Bangladesh but also a sign of China’s positive intention towards Bangladesh. Beijing always promotes its partner to have more bilateral trade engagement which has been once again proved by the decision to include leather and leather-related goods in the preferential list. 

The economic fallout triggered by Covid-19 has an adverse impact on the world’s economy and Bangladesh’s economy is not an exception to this. The pandemic has exposed a vulnerability to the cross-country supply chain ultimately bringing negative consequences for Bangladesh. And, a visible example of such impact on Bangladesh’s economy is the slowdown of the country’s projected GDP growth rate. Bangladesh has been experiencing negative growth in its export not only to China but also to other export destinations. China’s decisions to provide preferential treatment come at a time when Bangladesh is in dire need to increase its cross-border trade to confront the economic challenges posed by the Covid-19.

Cross-border trade can help Bangladesh to boost economic growth with enhanced productivity, higher income, and greater employment opportunities. China, the largest trading partner of Bangladesh, has some sort of responsibility towards Bangladesh for boosting the latter’s international trade engagement. This actually motivated the Xi Jinping administration to offer tariff holidays for 98 percent of Bangladeshi products. The fundamental objective of such a facility is to increase bilateral trade between these two Asian economies. Apart from promoting trade relations, this move of Beijing will re-strengthen trade, investment, and economic cooperation with Dhaka. Also, this special treatment will benefit the Bangladeshi businessmen by providing access to the Chinese market with favourable terms and conditions. And this is how China is actually setting a glaring example for the rest of the developed economies on creating a world of “balanced trade”.

China has successfully fulfilled its responsibility that the people of Bangladesh have been expecting for addressing the “trade imbalance”. Now, it is Bangladesh’s turn to take effective steps to make the best out of this preferential treatment. If Bangladesh could properly utilize this “tariff concession”, then it could successfully address its trade deficit with China and ensure overall trade surplus in its balance of payment. As China is moving towards producing high-value goods, greater economic engagement with China will help Bangladesh to prepare itself as a lucrative ground for relocating China’s sunset industries.

Any preferential treatment is not enough for a country to get benefited unless the beneficiary country has enough capability to penetrate into the counterpart’s market utilizing the facility effectively. That is why Bangladesh has to chalk out a plan on ensuring the optimum output of the “zero-tariff” access granted by China. Obviously, Bangladesh has to penetrate into the Chinese market with quality products at a competitive price. In order to ensure this, concerned Bangladeshi Ministries may conduct a market survey to have a better understanding of China’s consumers and promote exporting those products on which Bangladesh has competitive advantages e.g., RMG, leather goods, jute goods, etc. By declaring this tariff holiday, China displayed its intention to assist Bangladesh to explore the market of 1.42 billion people, to boost Bangladesh’s export to bridge the trade gap, and to address the trade deficit that Bangladesh has been experiencing for a long period of time.

 

The writer is a women's rights activist