PM’s visit may open door for FTA with China: Titu

Bangladesh is expecting a formal declaration of the beginning of a negotiation of a free trade agreement (FTA) with China during Prime Minister Sheikh Hasina's visit to China next week, State Minister for Commerce Ahasanul Islam Titu said today.

The commerce ministry has already sent a proposal to the foreign ministry to include the FTA issue as an agenda of discussion during the premier's four-day visit to China starting from July 8, he said.

The first round of negotiation for advancing the FTA between the two nations is yet to be taken place although the joint feasibility study has already been conducted on the possible deal, Titu told The Daily Star over phone.

Bangladesh has been traying to sign trade deals with major partners, including China, the largest import source for the country, mainly to retain the duty benefit even after the graduation from the least developed country (LDC) category.

Being the second largest apparel exporter worldwide after China, Bangladesh is heavily reliant on China for its raw materials like fabrics and chemical at competitive prices.

China is the single largest trading partner of Bangladesh now.

Bangladesh imports nearly $23 billion -- $22.90 billion in real term as per the data from the commerce ministry in 2022-23 fiscal year -- worth of raw materials, capital machinery, textile fabrics and chemical, yarn, woven fabrics, garment articles and food items from China.

Of the total annual import duty revenue of Bangladesh, one third comes from Chinese import duty.

Bangladesh government earns more than Tk 25,000 crore or $2.14 billion as duty on import of Chinese goods in a year.

However, if Bangladesh graduates to a developing nation from the LDC in November 2026, the country will not be able to collect this big amount of revenue as import duty from Chinese goods.

Because, Bangladesh will have to liberalise its tariff structure for other countries as a developing nation.

Currently, China has 22 FTAs with 29 countries, including nations like Mauritius and Cambodia. Chinese investors and entrepreneurs are interested to sign the FTA with Bangladesh mainly because of two reasons.

The primary reason is that the Chinese entrepreneurs want to relocate their old factories and other industries to Bangladesh and they want to re-export goods from China under a liberal duty structure.

Bangladesh cannot utilise the Chinese trade facility of 98 percent duty privilege because of not having diversified export products.

Of the total annual export of Bangladesh, over 84 percent are garment items while China, the largest apparel supplier of the world, imports garment items worth only $10 billion in a year.