FTA with ChinaBD, China lay groundwork for joint feasibility study

FT ONLINE

Bangladesh expects to draw a large investment from China by signing a free trade area (FTA) agreement, trade officials have said.

Both countries have started working towards a joint feasibility study on the possibility of inking an FTA deal.

The first meeting on the study was held last week in Beijing where trade officials of the two countries finalised the terms of reference (ToR) and structure of the study report.

Both sides outlined the study areas of the FTA, which aims to boost trade and investment between the two countries.

"The FTA, if found feasible, will be a comprehensive one," a senior official at the ministry of commerce said.

Each year Bangladesh imports goods worth US$ 11 billion from China. The revenue income from the import is around $ 2.70 billion.

The official said if the FTA focuses only on trade in goods, Bangladesh will lose a significant amount of revenue.

"So we wanted trade in goods, services, investment and other trade-related issues to be included in the FTA deal," he said.

The official said the Bangladesh side demanded large investments from China after the conclusion of the free trade accord.

"They (China) agreed to relocate some factories to Bangladesh since their overall cost in production has increased," he said.

After producing goods in Bangladesh, China will take back those for their domestic consumption.

The two countries will study the feasibility of the FTA separately and during the period both sides will exchange necessary information.

The FTA, as outlined, will address tariff, rules of trade in goods, and the customs procedures for trade facilitation.

Besides, the deal will include sanitary and phyto-sanitary issue, technical barriers to trade, dispute settlement procedures, coverage of trade in services, and investment modalities.

The agreement will also address e-commerce, competition policy, intellectual property, trade and economic cooperation including the capacity building through knowledge transfer.

China wanted to complete the study by 2019 but the Bangladesh side said it may not be concluded in such a short period.

Additional secretary of the commerce ministry Shafiqul Islam, who led the delegation, said Bangladesh has been enjoying some duty benefit in the Chinese market as a least-developed country (LDC).

The FTA study and negotiations will take at least five years. By then Bangladesh will graduate to the developing country status, he added.

The FTA deal, if signed, will come into effect after Bangladesh's graduation to the next level, he said.

Mr Islam said the Chinese government agreed they will facilitate the outflow of their private investment to Bangladesh.

"I think Chinese investment to Bangladesh will increase manifold once the FTA is signed. Their private sector is eager to do so," he said.

Bangladesh and China inked a memorandum of understanding (MoU) for conducting the study when Chinese President Xi Jinping visited Dhaka in October 2016.

Contacted over telephone on Friday, distinguished fellow of the Centre for Policy Dialogue (CPD) Debapriya Bhattacharya said there is no problem in exploring the FTA possibility with China.

But during the study, he said, some issues have to be kept in consideration so that Bangladesh can benefit from the deal.

Mr Bhattacharya said Bangladesh needs to check whether it will get preferential tariff reduction and whether products having export potential can be included in the list.

"The amount of revenue loss from the agreement needs to be calculated and non-tariff barriers have to be addressed," he said.