Bangladesh intends to submit its formal application for the membership of the Regional Comprehensive Economic Partnership (RCEP), the world's largest trade bloc led by China, once it receives approval from the Prime Minister's Office.
"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," Additional Secretary of the Ministry of Commerce (FTA) Noor Md Mahbubul Haq told The Business Standard on Sunday.
However, it will take at least two to three years for Bangladesh to join the bloc after submission of the application due to a lengthy negotiation period, said ministry officials.
The RCEP member countries signed the free trade agreement in November 2020. 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. Bangladesh will also have to conduct separate negotiations with the 15 RCEP members, which will take time, according to officials.
An inter-ministerial meeting chaired by Commerce Secretary Tapan Kanti Ghosh last month decided in favour of joining the bloc. The ministry has already initiated the application process and as part of that, a summary was sent to the prime minister for a final go-ahead.
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.
Ministry officials said numerous issues were taken into consideration before making the policy decision to join the RCEP. Countries in East and South Asia, which are members of the RCEP, will be the heart of the world economy in this century. Hence, it will be logical for Bangladesh to connect with that process.
They said although the RCEP is referred to as a China-led trade bloc, close US allies Japan, South Korea and Australia are also members of it. Moreover, India can accede to the RCEP at any time as a founding member.
On the other hand, among the countries with which Bangladesh is now negotiating to sign free trade agreements, six countries – Japan, Indonesia, Malaysia, Singapore, South Korea and China – are in the RCEP.
Bangladesh has also conducted a feasibility study on joining the RCEP and the study found that joining the bloc could increase Bangladesh's exports by $5 billion.
The 15 RCEP countries account for about 30% of the world's population (2.3 billion people) and a market of $26.3 trillion.
Members of the trade bloc have to negotiate trade tariffs with one another. If it joins the RCEP, Bangladesh also has to reduce import tariffs, subject to negotiations with other members. However, import tariffs can be reduced gradually over a period of 10 to 25 years as per RCEP rules.
Ministry officials said making a connection with the regional value chain through the RCEP has huge significance.
For instance, Vietnam imports raw materials from China and Chinese investment in the country is also huge. On the other hand, Vietnam's exports to countries, including China, are significant. As a result, Vietnam is already connected and integrated with the value chain of the RCEP countries.
Although Bangladesh is outside this integration, China is its main source of raw material imports. So, how Bangladesh can benefit by joining the RCEP is a matter of importance, said a commerce ministry official on condition of anonymity.
He also said in the first 10 years of 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.
Ministry officials also said Bangladesh is formulating the Import Policy Order, Export Policy Order, Tariff Policy, and Free Trade Agreement (FTA) Policy with emphasis on LDC graduation and trade liberalisation