If Bangladesh gets qualified for the RCEP partnership, it will open its door for her to seek room in RCEP-based FTA as well, leading to a dramatic shift in the country’s trade future.
The geopolitical pendulum of summits has been swinging around Asia ever since August. Asia has been confronting high-strake global summits like BRICS, ASEAN, G-20, and East Asia summit in its foregrounds. Even the UN General Assembly’s 78th General Assembly is knocking at September’s door. Amidst all, Indonesia dragged another stone after the successful conduction of the 13th ASEAN Summit.
On 6th September, being the chair of the 13th ASEAN summit Indonesia hosted the Regional Comprehensive Economic Partnership (RCEP) Roundtable Dialogue in Jakarta. Taking the notion of the event, Bangladesh is preparing to apply for an RCEP partnership.
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Arsjad Rasjid, the Chair of the ASEAN Business Advisory Council (ASEAN-BAC) and Chair of the Indonesian Chamber of Commerce and Industry (Kadin) emphasized the need for concrete actions to achieve global development and RCEP Roundtable Dialogue was an exclusive extension of the ASEAN Business and Investment Summit (ABIS), saying that a total of 40 companies from 15 countries across ASEAN and its dialogue partner countries participated in the discussions, which aimed to explore ASEAN’s various potentials through RCEP.
What is RCEP?
Regional Comprehensive Economic Partnership (RCEP) is a modern, comprehensive, high-quality, and mutually beneficial economic partnership that was built upon ASEAN’s bilateral agreements with five free trade agreement (FTA) nations. RCEP is composed of 15 members which contributed one-third to the global gross domestic product (GDP) and comprised one-third of the global population as RCEP is currently the largest trade bloc in the globe. The RCEP came into effect on 1 January 2022. According to the pact’s rules, from 1 July 2023 onward, other countries can also accede to the pact. Sri Lanka and Hong Kong have already applied for accession.
The Roundtable Dialogue of RCEP culminated with the launch of the RCEP Joint Task Force to mobilize donations from industry leaders in RCEP member countries, aiming to accelerate the RCEP vision and opening trade routes worth over US$100 billion annually by 2030. Arsjad Rasjid stated “As of now, RCEP’s contribution accounts for only about 2 percent of the total trade activities of its member countries. RCEP holds significant potential to enhance trade flows in this region. This summit serves as a crucial moment to remind the relevant nations to unite in addressing diverse global challenges”.
China’s Proposal Regarding RCEP-based FTA
Taking benefit of the opportunity, Chinese Premier Li Qiang who has been representing China on behalf of Xi Jinping has urged Japan, South Korea, and ASEAN countries to support China’s bid to join the world’s largest free-trade pact the FTA in the ASEAN Summit on the 6th September of 2023. With the mentio0n of China’s intention of expanding trade and mobility within the Asia-Pacific, Premier Li Qiang stated “I hope all parties will support Hong Kong to become one of the new members of the Regional Comprehensive Economic Partnership.”
“Disagreements and disputes between nations sometimes stemmed from misconceptions or perceived conflicts of interest, while at other times they stemmed from some undue external interference,” Li Qiang added.
“It’s very important at present to oppose taking sides, bloc confrontations, and a new cold war,” Qiang further added.
Clearing the Fog
These particular statements of Li Qiang gave birth to China’s prognosis regarding the unannounced coalition with the United States. The US government has been fueling China’s Cold War by arm aiding Taiwan. Even the Biden Administration’s recent FMF arms-aiding to Taiwan ended up cornering China. According to the critiques, the rising unrest between the two governments has pushed China to pull up its gourd. This may be the potential reason for Xi Jinping to avoid the current global summits and Qiang’s resort for seeking support for RCEP membership. It should be mentioned that, last year China formally requested to join the RCEP when the free-trade pact took effect for the inaugural 10 economies.
Bangladesh Applying for RCEP
Cherishing the fact Bangladesh intends to submit its formal application for membership to join the Regional Comprehensive Partnership (RCEP) to retain duty benefits once it makes the United Nations status graduation from a least developed country to a developing one by 2026, as the negotiation period is a lengthy process. The submission awaits to receive approval from the Prime Minister’s Office.
Noor Md Mahbubul Haq, the Additional Secretary of the Ministry of Commerce stated, “A summary on the pros and cons of joining the bloc has been sent to the prime minister. Upon approval, a formal letter of interest will be sent to the RCEP for Bangladesh’s accession as a member.”
A free-trade agreement (FTA) or treaty is an agreement according to international law to form a free-trade area between the cooperating states. In November 2020, the Free Trade Agreement (FTA) was signed by the RCEP member countries. However, countries intending to be part of it had to start negotiations for joining the pact in 2012. Each country negotiated separately with each other regarding trade issues such as tariffs.
RCEP requirements for Bangladesh
Bangladesh will also have to conduct separate negotiations with the 15 RCEP members, which will take time, according to officials. Bangladesh also conducted a feasibility study as a part of the process for joining the RCEP and the study found that joining the RCEP bloc could increase Bangladesh’s exports by $5 billion. If Bangladesh joins RCEP, then the country also has to reduce its import tariffs, subject to negotiations with other members. However, it has some flexibility in the reduction of import tariffs gradually for 10 to 25 years as per RCEP rules.
Tapan Kanti Ghosh, the Commerce Secretary of the Ministry of Commerce stated that, in the first 10 years of Bangladesh joining the RCEP, import tariffs have to be reduced for about 90% of the trade among member states. An additional 15 years will be available for tariff reduction of the remaining 10% trade.
“Bangladesh is formulating the Import Policy Order, Export Policy Order, Tariff Policy, and Free Trade Agreement (FTA) Policy with an emphasis on LDC graduation and trade liberalization,” Ghosh added.
Future Shift in the Asian Market
Also joining the RCEP is capable of Bangladesh’s high-stake trades like the trade of about $130 billion going through sea routes, around $1.69 billion of textile and machinery with South Korea, and $2.33 billion worth of textile trade with Japan. In other words, if Bangladesh gets qualified for the RCEP partnership, it will open its door for Bangladesh to seek room in RCEP-based FTA as well, leading to a dramatic shift in the country’s trade future. Moreover, China’s inclusion in the RCEP-based FTA will create opportunities for credit rating fluency, inter-subcontinental currency liquidity, or even market validation bringing a revolutionary shift in the Asian trade market.