Key Highlights:
- Bangladesh-Japan Trade Grows, Yet Deficits with India and China Loom Large
- Japan’s Regional Integration Vision Underscores Significance of EPA for Bangladesh
In the dynamic arena of global commerce, Bangladesh is orchestrating a sophisticated strategy of trade agreements and diplomatic ties to navigate its economic course. Within this dynamic landscape of international trade, Bangladesh is embarking on a transformative journey, forging strategic trade agreements and diplomatic alliances to propel its economic trajectory forward. A pivotal move in this direction is the initiation of negotiations for an Economic Partnership Agreement (EPA) with Japan, slated to commence before 2026. This proactive step underscores Dhaka’s strategic objective of attracting substantial investments from Japan’s robust economy while safeguarding its duty-free export privileges post-LDC graduation.
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Bangladesh’s impending graduation from the least developed country (LDC) status in 2026 presents a unique set of challenges and opportunities. While the country’s brand image is poised for improvement, it will face increased hurdles in the realm of international trade, including the potential loss of preferences, privileges under the Generalized System of Preferences (GSP), duty-free quota-free (DFQF) schemes, LDC-specific special and differential treatment (S&DT), and trade-related intellectual property rights.
Challenges and Opportunities Post-LDC Graduation
Navigating the Post-Graduation Landscape
The Urgency of Trade Agreements
One of the viable solutions to mitigate the impact of LDC graduation is to sign trade agreements with key partners, particularly the EPA. International trade experts estimate years of negotiation to secure such agreements, highlighting the urgency for Bangladesh to commence negotiations swiftly.
Leveraging Transition Provisions
While some trade partners, such as the EU, offer three years of preferential market access after graduation, newly graduating LDCs will also enjoy flexibilities like the TRIPS patent waiver until 2032 and the GATS Services waiver until 2030. Additionally, the World Trade Organization (WTO) will continue to support measures like the Enhanced Integrated Framework (EIF) and the Technology Bank for an additional five years post-graduation.
Capitalizing on Existing Partnerships
Considering Japan’s status as the number one development partner, the increasing presence of Japanese companies in Bangladesh, trade opportunities via the Matarbari Deep Sea Port, and the potential for specialized economic zones securing an EPA with Japan becomes a strategic imperative for Bangladesh before the expiration of LDC benefits.
In the vast tapestry of global trade, Bangladesh’s pursuit of an Economic Partnership Agreement with Japan represents a pivotal step towards securing its economic future.
Imperative for EPA Signing with Japan Amidst LDC Transition
In the face of looming challenges post-LDC graduation, Bangladesh stands at a crucial juncture regarding its trade relations, particularly with Japan. As Japan discontinues GSP and other LDC facilities upon graduation, Bangladesh faces the urgent need to secure its economic interests through an Economic Partnership Agreement (EPA) with Japan.
Here’s the importance of this agreement:
- Japan’s discontinuation of GSP and other LDC benefits post-graduation affects countries like Batswana, Cabo Verde, the Maldives, Samoa, Equatorial Guinea, and Vanuatu. Consequently, prompt EPA signing with Japan becomes imperative. Despite Bangladesh’s efforts, such as establishing the National Committee on LDC Graduation (NCG) and forming thematic subcommittees, progress appears sluggish. Encouragingly, negotiations for the EPA with Japan are advancing more swiftly than those with China and India. A joint study group recommended a high-level EPA in line with WTO standards (Article 24.8 of GATT), poised to enhance trade and investment, fortifying the strategic partnership since April 2023.
- Bangladesh’s exports to Japan reached US$ 1.9 billion in 2023, with imports totaling $2.02 billion, indicating a trade gap of approximately $120 million. However, bilateral trade has been steadily growing, surging from $3.313 billion in 2018 to $3.92 billion in 2023. Conversely, trade imbalances with India and China remain considerable, necessitating extensive efforts to negotiate CEPA with these nations.
- Bangladesh primarily exports apparel, textiles, leather goods, and electronics to Japan, while importing iron, steel, vehicles, machinery, and electronic equipment. An EPA holds the potential to diversify exports, including light engineering products, jute goods, IT services, plastics, footwear, and agricultural products, while Japan could export iron, steel, automobiles, and machinery.
- Bangladesh anticipates an influx of Japanese companies attracted by its expanding market and Japanese companies’ relocation from ASEAN and China. The construction of the Japanese Special Economic Zone (JSEZ) in Araihazar, with significant investment and job creation prospects, underscores Japan’s interest. However, failure to sign the EPA by 2026 could prompt a substantial portion of Japanese companies to relocate, jeopardizing Bangladesh’s economic prospects.
- Japan’s vision to connect Northeast India with the Matarbari Deep Sea Port underscores the significance of tri-national cooperation among Japan, India, and Bangladesh. Bangladesh’s participation in initiatives like the Sabroom-Ramgarh road connectivity and the ‘Kizuna’ conclave indicates its pivotal role in this vision, highlighting the criticality of the EPA with Japan.
- Bangladesh’s request for EPA negotiation training from Japan is crucial, given its limited experience beyond a PTA with Bhutan. The EPA with Japan not only promises increased Japanese FDI and infrastructural development but also serves as a gateway for Bangladesh to establish trade agreements with other partners. With the GSP facility in Japan set to expire in 2027, swift and effective negotiation by Bangladesh is imperative, ensuring a win-win outcome for both parties.
In conclusion, Bangladesh stands on the brink of a transformative phase post-LDC graduation, wherein strategic trade agreements hold the key to unlocking new avenues of growth and prosperity. With EPA negotiations underway, the onus lies on Bangladesh to navigate these challenges adeptly, ensuring a win-win outcome that fortifies its economic resilience and secures its position on the global stage.
