FTA with China may cost Bangladesh Tk 15,000cr a year: study

Bangladesh may lose nearly Tk 15,000 crore per year in revenues from import duties if a proposed free trade agreement (FTA) is signed with China, according to a new study.

However, at the same time, Bangladesh stands to gain billions of dollars if Chinese investors come here with investment proposals under the FTA, the study also said.

These are the preliminary findings of a joint feasibility study conducted by Bangladesh and China as they look to begin negotiations for the FTA, said a senior official of the commerce ministry, asking not to be named.

The countries signed a memorandum of understanding in October 2016 to conduct the joint feasibility study. In June 2018, the countries began conducting a preliminary study on the proposed FTA, the senior official also said.

Two different studies were conducted, he added. Bangladesh conducted a study on trade in services while China conducted a study on trade in goods.

Senior Commerce Secretary Tapan Kanti Ghosh and Chinese Ambassador to Bangladesh Yao Wen exchanged the documents of the preliminary studies at a press conference held at the commerce ministry office in Dhaka yesterday.

In the preliminary study, there is no exact figure of how much either country may benefit, added the official.

However, the Chinese government will have to facilitate local companies who want to invest in Bangladesh, the official said.

He added that it was just the beginning of negotiations and it may take a long time to complete as the commerce ministry will hold a series of meetings with government officials and private sector stakeholders for their opinions.

Currently, China is Bangladesh's single largest trading partner, with the bilateral trade amounting to $24 billion.

Bangladesh exported goods to China worth $677 million and imported goods worth $22.90 billion from China in fiscal year 2022-23, according to data from the commerce ministry.

At the press conference, Ghosh said the government has engaged major trading partners in negotiations for FTAs, economic partnership agreements, comprehensive economic partnership agreements, and preferential trade agreements.

The aim is to retain duty preferences after Bangladesh makes the United Nations country status graduation from a least developed to a developing country in November 2026.

China currently provides duty benefits for 98 percent of Bangladeshi products.

If negotiations take a long time, Bangladesh will seek the continuation of LDC benefits from China until the signing of the FTA, Ghosh said.

He added that more detailed studies need to be conducted before the FTA can be signed.

Yao Wen said China has been negotiating with Bangladesh mainly to overcome economic challenges and to increase trade between the two countries.

An FTA may address those challenges and exports from Bangladesh to China may eventually increase if facilities can be created.

Currently, China has 22 FTAs with 29 countries, including nations like Mauritius and Cambodia, he added.

Citing an example, the Chinese envoy said exports from Mauritius to China increased by 15 percent and exports from Cambodia to China rose by 30 percent after the signing of the FTAs.

This indicates mutual trade benefits after the signing of trade deals, he said, adding that Bangladesh could export more jute and jute goods, leather and leather goods, and aquatic products to China.

Among agricultural products and those of agro-processing, mangoes, jackfruits, and juice products could also be good items for export from Bangladesh to China.

On the other hand, Chinese investment could bolster the IT and agricultural sectors and can make Bangladesh a manufacturing hub in South Asia if the FTA is signed, the ambassador also said.

Currently, China is the second largest source of foreign direct investment (FDI) for Bangladesh.