How Bangladesh can protect its domestic industries after LDC graduation
After LDC graduation, anti-dumping, countervailing and safeguard measures are key tools to protect domestic products and their markets. Bangladesh is currently capable of levying those measures, but no domestic industry has applied for such duty measures yet
During 12-16 March, 2016, at the Committee for Development Policy's (CDP) triennial review meeting in New York, USA, it was decided that Bangladesh would be removed from the LDC list.
After the UN-CDP tri-annual review meeting in New York on February 22-26, 2021 CDP Chairperson Tefari Tesfaso said that Bangladesh had received the CDP's final recommendation to move from the list of LDCs to developing countries.
More recently, on 24 November, the UNGA adopted the resolution allowing Bangladesh to move into the developing country grouping from the least developed country (LDC) category during the 40th plenary meeting of its 76th session following a recommendation of the CDP. On the day, two other countries – Nepal and the Lao People's Democratic Republic – also got clearance for LDC graduation.
Bangladesh will officially gain the status of a developing country with the approval of the UNGA as the UN has given the country five years, instead of three, to prepare for the graduation.
If all goes well, Bangladesh will be out of the LDC category by 2026.
As an LDC, Bangladesh currently enjoys the WTO's Duty-Free Trade Facility (GSP). After graduation, Bangladesh will be deprived of GSP facilities.
Apart from the GSP facilities, Bangladesh will need to set up Free Trade Agreements (FTA) for trade with other countries. Doing an FTA with a developed country means we have to set our country's tariff to zero for most of the products from that country and give duty-free access to our domestic market.
Currently, the government can protect domestic products and the local markets from cheap imports by imposing customs duties (CD). After signing future FTAs the scope for such protectionist measures will become few and far between.
In addition, the National Board of Revenue (NBR) currently imposes a minimum import price on foreign goods through the national budget. After LDC graduation, Bangladesh will no longer be able to do so under the WTO's Customs Valuation Agreement. Also, all types of para-tariff imposition would be risky after graduation. These sorts of issues can threaten the competitiveness of domestic products in our domestic market
Earlier, since the 1990s, the free market economies have led to the liberalisation of international trade, which has led to local producers from all over the world facing various forms of illegal competition through foreign products. As a result of the signing of the WTO Agreement to protect domestic producers from these harmful effects of competition, the Government of Bangladesh can take three steps:
1) the imposition of 'anti-dumping' duties on dumped imported goods, 2) the imposition of 'countervailing' duties on imports of subsidised goods from exporting countries, and 3) the imposition of 'safeguard' duties to prevent the loss of domestic industry as a result of increasing imports, etc.
Bangladesh has so far not imposed any sort of such duty upon any product. Although one or two company/ies in Bangladesh did apply for duties on imports initially, the process was never followed through.
There appears to be hesitation in the imposing of anti-dumping, countervailing and safeguard duties as per WTO rules. Even though many domestic companies have suffered from cheap imports they have not applied for anti-dumping, countervailing and safeguard duties against foreign products due to the delay associated with maintaining the process according to WTO rules.
However, most of the domestic industries are not yet aware that under these rules, it is possible to impose a temporary duty, 60 days after the commencement of the investigation through which the enterprises can be protected as soon as possible.
According to the anti-dumping, countervailing and safeguard rules, an industry needing protection has to provide various information regarding dumping/subsidies, the rise of imports, industry's information regarding loss and the causal relationship between them.
Most of the domestic industries of Bangladesh are not able to provide the required information at the right time. Moreover, they often do not have the proper information, which is why they cannot apply properly. Due to this, Bangladesh is not able to impose such duties.
In addition, the NBR has been protecting domestic industries from the aggression of foreign products for more than 20 years by fixing supplementary duties (SD), regulatory duties (RD) and tariffs on imported goods. No industry/ies has to provide any sort of special information to avail such benefits from the NBR.
Thus, domestic industries can resolve their problems quickly just before the upcoming Budget Session.
After LDC graduation, however, Bangladesh will lose the opportunity to fix such SD, RD and tariff prices of imported goods.
Anti-dumping, countervailing and safeguard duties will be the only way to escape the aggression of foreign goods during that time. So, relevant government authorities have to take proper initiatives to motivate local industries to take those safety measures instead of applying for SD, RD and tariff facilities.
Only the Ministry of Commerce and the NBR can encourage local industries in this regard.
Interestingly, although Bangladesh has yet to impose such duties, various countries around the world have been imposing such duties on Bangladeshi products for nearly 30 years.
The anti-dumping duty imposed on Bangladeshi products so far include: 1) 'Cotton Shop Towels' by the US Government (on 20 March, 1992), 2) 'Jute Shakes and Bags' by the Brazilian Government (on 30 September, 1992), 3) 'Jute Yarn' by the Brazilian Government (on 7 November, 2006), 4) 'Hydrogen Peroxide' by the Government of Pakistan (on 26 April, 2015), 5) 'Jute' by Government of India (on 6 November, 2015 and on 31 March, 2016), 6) 'Fishing Net', by the Government of India (on 14 June, 2017), according to Bangladesh Trade and Tariff Commission and related ministries.
In addition, on 22 July 2011, the Turkish government imposed a seven-year safeguard duty on textiles and apparel, according to Bangladesh Trade and Tariff Commission and Ministry of Textiles and Jute.
Bangladesh is currently capable of levying anti-dumping, countervailing and safeguard duties as per the conventional rules of the WTO. Although so far no domestic industry has applied for such duty measures.
However, the surveillance of Bangladesh's trade by various countries will be increased frequently due to the transition from LDC.
Therefore, to make the LDC graduation of Bangladesh successful, it is necessary to reduce the dependency on SD, RD or tariffs to protect domestic industries gradually. At the same time, emphasis on anti-dumping, countervailing and safeguard duties is necessary as an alternative to those protections.
The author is a Deputy Chief of the Bangladesh Trade and Tariff Commission. Before Joining the BTC, he worked at BRAC as an Area Manager of Microfinance Division and at UNFPA as a Project Associate of its 7th Country Program.