Bangladesh and Japan have formally begun the negotiation to strike a trade deal to allow manufacturers to keep enjoying duty-free export benefits in the post-LDC era and draw investments from the Far East nation.

The first round of the talks aimed at signing an Economic Partnership Agreement (EPA) started in Dhaka on May 19 and ended on May 23. Details of the meeting were not made public.

"In this round of negotiation, both sides exchanged their views on the method of negotiations and a broad range of negotiating areas," said a press release.

"At the meeting, we mainly shared information on the 17 sectors that were identified in the joint study," said a senior official of the government of Bangladesh and a member of the negotiation team, requesting anonymity.

The joint study group has identified the sectors, which include trade in goods, trade remedies, rules of origin, customs procedures, and trade facilitation, sanitary and phytosanitary measures.

The other sectors are technical barriers to trade, trade in services, investment, electronic commerce, government procurement, intellectual property, competition, improvement of the business environment, labour, environment, transparency, cooperation, and dispute settlement.

The meeting was attended on the Japanese side by Taketani Atsushi, ambassador in charge of economic diplomacy and deputy director-general of the Economic Affairs Bureau of the foreign affairs ministry, and representatives from other ministries, according to the statement.

Ahmad Munirus Saleheen, chairman of the Bangladesh Trade and Tariff Commission, and representatives from relevant ministries attended from the host side.

Iwama Kiminori, Japanese ambassador to Bangladesh, and Ahasanul Islam Titu, state minister for commerce, took part in the opening session.

Three rounds of meetings of the joint study group were held last year to pave the way for last week's formal launch of the negotiation.

Bangladesh is in talks with major trading partners to pen pacts such as the Free Trade Agreement (FTA), the Preferential Trade Agreement (PTA), the Comprehensive Economic Partnership Agreement, and the EPA to retain the zero-duty benefit on exports after the graduation of the country from the group of least-developed countries (LDCs) in November 2026.

Bangladeshi products will be subject to up to 18 percent duty in the Japanese market from the current zero-duty benefit if the EPA is not signed.

Bangladesh risks losing $8 billion in exports annually in the post-LDC era if the trade preference ends in all markets. Currently, 73 percent of the country's shipments enjoy LDC-linked benefits.

Japan is Bangladesh's 12th largest trading partner in exports and seventh-largest in imports. It is the lone country in Asia where Bangladesh's exports crossed the $1-billion mark nearly a decade ago on the back of the duty benefit.

The export of merchandise, especially garment items, to the Far East nation stood at $1.90 billion in the last fiscal year of 2022-23 while imports amounted to $2.02 billion, data from the commerce ministry showed.

About 85 percent of the local and Japanese companies with operations in both nations want their governments to sign an FTA, according to a survey of the Japan Bangladesh Chamber of Commerce and Industry in 2021.

About 15 years ago, textile and logistics industries from Japan began to expand their footprint in Bangladesh thanks to its abundant and inexpensive labour force.

In recent years, firms such as motorcycle manufacturers, major telecommunication companies and IT companies have invested in the country to tap the business potential in the fast-growing consumer market of 17 crore, the joint study group report said.

The number of Japanese companies operating in Bangladesh has tripled over the past decade to nearly 350. The stock of foreign direct investments from the country was $533.66 million in December 2023.

More investments are expected through the Bangladesh Special Economic Zone, which partially opened in December 2022. Located in Narayanganj, it is the first zone developed by a Japanese company in partnership with the Bangladesh Economic Zones Authority.

Both sides have targeted to conclude the negotiation by December 2025.

In December 2020, Bangladesh signed a PTA with Bhutan to safeguard the duty benefit, its first bilateral trade deal with any nation.