An inter-ministerial meeting has in principle decided in favour of Bangladesh joining the Regional Comprehensive Economic Partnership (RCEP), the world's largest trading bloc led by China.
The decision, made on Tuesday in an inter-ministerial meeting chaired by Senior Commerce Secretary Tapan Kanti Ghosh, will now require approval from the Cabinet.
"The inter-ministerial meeting, with some precautions, has made a decision in favour of Bangladesh joining the RCEP," Noor Md Mahbubul Haq, an additional secretary (FTA) of the commerce ministry who was authorised by the meeting to speak to the media, told a group of reporters.
Officials from the Prime Minister's Office, the ministries of Textiles and Jute, Agriculture, Food, and Fisheries and Livestock, and the National Board of Revenue were present in the inter-ministerial meeting.
Asked when the application will be filed, he said the agreement does not state anything about the accession process.
"That means now we have to inquire whether Bangladesh will need to make an application or follow a prescribed model to join the RCEP," he elaborated.
The RCEP, a pact of 15 countries that accounts for about 30% of the world's population (2.3 billion people) and a market of $26.3 trillion, was launched in January last year.
According to the rules, since 1 July this year, other countries can also apply to join the bloc, and Sri Lanka and Hong Kong have already filed their applications to become its members.
During the meeting, they also reviewed the commitments made by Vietnam, which is Bangladesh's peer and a rival country in international trade, to join the trading bloc.
Several officials who participated in the meeting highlighted that in the 21st century, the centre of the global economy comprises East Asian countries, including Asean, which are part of the RCEP. Therefore, it would be logical for Bangladesh to join the centre of the world economy.
The officials said that although RCEP is called a China-led trading bloc, America's close allies such as Japan, South Korea and Australia are also members. Moreover, India can also join RCEP as a founding member at any time.
On the other hand, out of the countries with which Bangladesh is now negotiating to sign free trade agreements, six have been included in the RCEP. The possibility of increasing Bangladesh's exports by $5 billion after joining this bloc has emerged in a feasibility study.
The RCEP countries have taken 10 to 25 years to reduce their tariffs. In this case, Bangladesh will have to do separate negotiations with each country if it joins the bloc.
Commerce ministry officials said that the majority of those present at the meeting were in favour of joining the RCEP. They said that the importance of connecting to the regional value chain through inclusion in RCEP has gained importance. In this case, the opinion has also been raised about the possibility of how much Bangladesh's exports can increase.
According to a commerce ministry official, Vietnam imports raw materials from China. Chinese investment in the country is also huge. Again, Vietnam's exports to the RCEP countries, including China, are significant. As a result, Vietnam is already connected to and integrated into the value chain of RCEP countries.
"Although Bangladesh is outside this integration, our main source of raw material imports is China. In this situation, how Bangladesh can benefit from joining RCEP, the issue got importance in the meeting," he added.
The official said Bangladesh is preparing to sign a Comprehensive Economic Partnership Agreement with India, which may join the RCEP at any time. In the case of Bangladesh, the issue of bilateral agreements with India and involvement in the regional value chain was discussed as one of the issues in the meeting.
He further said that tariffs have to be reduced for 90% of the trade in the first 10 years after joining RCEP. An additional 15 years will be available for reducing the remaining 10% of the tariff.
He said that in the case of negotiations with each RCEP country, Bangladesh should carefully review the laws and regulations. The negotiations should be conducted while considering the benefits that Bangladesh can gain in the service sector, investment, and TRIPS (Trade-Related Aspects of Intellectual Property Rights).
Additionally, there is a need to conduct adequate studies in advance to determine where Bangladesh will keep its reservations, the official added.
Professor Mostafizur Rahman, a distinguished fellow at the Center for Policy Dialogue, said it is a "good initiative," adding that the preparations Bangladesh is making for joining the RCEP along with Free Trade Agreement (FTA) negotiations with various countries on the eve of LDC (Least Developed Country) graduation is a "timely step".
He said trade liberalisation and the reduction of tariffs are necessary steps for joining the RCEP. Standardisation, harmonisation, and quality control measures are crucial to enhancing the competitiveness of local industries.
The noted economist told TBS that there were two types of rules in the ASEAN agreement. Some countries, including Cambodia, used to get extra benefits compared to others. Bangladesh may also seek similar benefits from the RCEP.
"That is, we would receive more benefits from the RCEP countries but would give less, which is less than the reciprocal system," he added.
Professor Mostafizur Rahman said once Bangladesh joined RCEP, the government's revenue from customs duties would decrease when importing goods from these countries.
"The government will have to compensate for this by increasing exports. That is why foreign investment should be given importance, and when investment from RCEP countries in Bangladesh increases, exports will also increase. Through this, export diversification will also be possible," he added.
He said currently, 12% of Bangladesh's exports go to South Asia, East Asia, and Asean countries.
Al Mamun Mridha, general secretary of the Bangladesh-China Chamber of Commerce and Industries, said China's investment in the countries that have joined RCEP has increased significantly in the last one and a half years.
"If Bangladesh joins RCEP, Chinese investment in Bangladesh will also increase. In addition to the diversification of export products, the industrial sector of Bangladesh will get an opportunity to develop through technology transfer," he told TBS.
Noor Md Mahbubul Haq said, "Among those with whom we are currently negotiating FTAs, apart from India, six countries – Japan, Indonesia, Malaysia, Singapore, South Korea, and China – are in the RCEP. That is, we are negotiating bilateral agreements with the countries that are part of the bloc. Since the countries have a forum with which Bangladesh is interested in doing an FTA, importance should be given to how Bangladesh will be involved in bilateral and group-based negotiations."
Officials at the commerce ministry said that in the transformation that is happening in the country's textile sector, man made fibre is gaining importance over cotton in the coming days. Bangladesh will have to give importance to how much it can export to the RCEP countries.
They said Bangladesh is protecting its domestic industry by imposing high tariffs and barriers on imports. As a result, Its entrepreneurs find it more profitable to sell products in the local market than to export. In this situation, the country must be careful about how competitive the domestic industry will be if it joins the RCEP.
India stopped from joining RCEP at the last minute due to concerns about the competitiveness of its local industries. Asean already has an FTA with India, which has put pressure on India's local industries. As a result, India chose not to join the RCEP to safeguard its domestic industries.
Officials at the commerce ministry stated that the Import Policy Order, Export Policy Order, Tariff Policy, and FTA Policy are currently under process with a focus on LDC graduation and trade liberalisation.
They said the country will have to work on how it will use the 10- to 25-year period for tariff reduction, how it will be adjusted with the economic transformation, and how the RCEP can be connected with the LDC graduation.
It was Bangladesh's fourth meeting on RCEP. Earlier, the first meeting was held by the Ministry of Commerce after collecting reports from various embassies about the bloc. In the second and third meetings, emphasis was placed on conducting a feasibility study for joining the RCEP.
Tariff Commission study in favour of accession
The Tariff Commission in its study explored the pros and cons of joining the RCEP. The report was mostly in favour of accession to the pact.
According to the Tariff Commission report, joining the RCEP will increase Bangladesh's exports to the global market by 17.37%, amounting to more than $5 billion.