Bangladesh Exports: Retain Duty-Free Access to 98%

tendata blogTrade Policy

ten data blog21-06-2023

bangladesh exports,bangladesh export

The UK's Developing Countries Trade Scheme (DCTS) came into effect on Monday, June 19, with simplified rules and tariff reductions that will boost access to the UK market for products from 65 developing countries, including Bangladesh.

"Bangladesh is due to graduate from LDC status in 2026. The changes made to the DCTS mean that Bangladesh will retain duty-free access for 98 percent of its exports, including ready-made garments. This is more generous than the UK's previous EU scheme for one member," the British High Commission said in a release in Dhaka on Monday, UNB reported.

Under the new scheme, Bangladesh will be able to participate in global value chains involving raw materials from 95 countries/regions and export its final products duty-free to the United Kingdom, provided they meet certain requirements, it said.

The announcement comes as a relief to Bangladesh as traders and policy makers were worried about the trade situation with the UK since the country left the EU.

"This new scheme demonstrates the UK's commitment to a modern and mutually beneficial partnership with Bangladesh," the press release said, adding that DCTS will help develop trade, increase employment and drive sustained economic growth.

It cautioned, however, that the retention of DCTS preferences is based on respect for human and labor rights and compliance with relevant international conventions, including those on civil and political rights, anti-corruption, climate change and the environment.

"DCTS promotes free and fair trade, human rights and good governance," said the High Commission.

DCTS makes it easier to produce goods using components from other countries/regions without losing duty-free status.

British High Commissioner to Bangladesh Sarah Cook said DCTS will support Bangladesh's manufacturing capacity, improve long-term economic growth and resilience, and enable access to global supply chains, according to UNB.

"It benefits the UK through greater consumer choice and competitive prices. This announcement underlines our commitment to a modern and mutually beneficial partnership with Bangladesh based on deeper economic and trade relationships and global standards."

It added that the program will help integrate developing countries into the global economy, create stronger trade and investment partners for the future, and strengthen supply chains.

Exporters are optimistic about the news and look forward to further boosting exports to the UK market.

In an interview with The Business Standard, Shahidullah Azim, vice president of BGMEA, said the DCTS program will create opportunities for Bangladeshi exports to the UK market, especially "when we will lose duty-free market access after LDC graduation.

He also mentioned that this facility will also help in negotiations with other countries after graduation.

However, the BGMEA vice president said there is no need to worry about maintaining compliance and labor rights as the Bangladeshi garment industry already maintains standards that go beyond what they set.

"There are two parts, one for entrepreneurs and the other for the government," Azim added.

Total British imports from Bangladesh jump 54.0 percent to 3.8 billion pounds ($48.6 billion) in 2022. Meanwhile, U.K. exports to Bangladesh grow 36.7 percent to 897 million pounds ($115 million) over the same period. The figures were released by the UK Department of Business and Trade in May.

Arshad Jamal Dipu, chairman of apparel exporter Tusuka Group, welcomed the British plan, saying it was a very positive step. "If the scheme continues to work, we hope that our exports will increase even after the LDCs graduate," he said.

Syedur Rahman Ranu, president of the British Bangladesh Chamber of Commerce and Industry (BBCCI), said the initiative taken by the UK is good news for Bangladesh. "It will also increase the export potential of non-garment products."

Trade researchers say issues such as human rights violations may still be important, although the new scheme lowers the value-added standard for developing countries to 25 percent from the current 30 percent and eases the conditions for ratification of 32 international conventions.

Dr. Mohammad Abdul Razak, an international trade expert and chair of the Development Research and Policy Integration, told TBS that the UK is not obliged to comply with 32 international conventions like the EU. "This means Bangladesh will get some relief on issues like human rights. But the UK will reserve the right to review in case of any violation," he said.

Former Foreign Secretary Md Touhid Hossain told TBS, "It's useless to judge now whether the terms of trade are reasonable for us, we have to accept these and be prepared." Assuming Bangladesh wants to reap the benefits, he said, it may have to abide by the terms. "At best we can bargain, otherwise there is no point," the former diplomat said, noting that most issues, such as labor rights, civil rights, political rights, are recognized in our constitution.

After leaving the EU, Britain plans to ease import terms this year by introducing a trade scheme for developing countries to replace the GSP in order to facilitate more trade with developing countries such as Bangladesh.

The scheme will offer lower tariffs and simpler rules of origin requirements for goods exported to the U.K., according to private research firm Research and Policy Integration for Development (RAPID), which said in March.

According to RAPID data, Bangladesh has gained most of the share that China has lost in the U.K. market.

RAPID Chairman Dr. Mohammad Abdul Razak predicted that "the growth rate (of Bangladeshi garment exports) could reach 10 percent by 2026 as some of the conditions of the DCTS have been relaxed and China's market share there is declining."

Bangladesh, which currently ranks second in the UK apparel market, has doubled its share of the market in 11 years to more than 14 percent by 2021, while China's share has fallen from 37 percent to 21 percent, the data show.

Trade researchers say issues such as human rights violations are likely to remain important, although the new plan lowers the value-added standard for developing countries to 25 percent from the current 30 percent and eases the conditions for ratification of 32 international conventions.

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