International Trade: Bangladesh's Economic Growth and Challenges

This report provides a comprehensive overview of international trade in the context of Bangladesh. It examines the country's impressive GDP growth, structural economic changes, and rising per capita income, highlighting the significance of trade for its economy. The report details Bangladesh's trade performance, including export and import values, trade balances, and the evolution of its trade policies. It analyzes the country's transition through different phases of global integration and explores the contributions of export earnings to national GDP. Key aspects such as export diversification, market share, and major exportable products are discussed, alongside challenges like market and product concentration. The report also addresses the impact of Bangladesh's graduation from LDC status, trade opportunities, preferential market access, and potential challenges, including market loss and the need for product and market diversification. It also reviews the country's export policy and the impact of graduation on its trade, emphasizing competitiveness factors, trade preferences, and future prospects.

International Trade: Bangladesh Context
Source:
Bangladesh Foreign Trade Institute (BFTI)

Bangladesh Economy
❑ GDP growth remained high
 Over the last two decades, GDP growth rate (5.9%) significantly
surpassed the global average (2.7%) and remained higher than the
average for developing countries (5.1%)
 If we exclude China, average GDP growth rate of Bangladesh was
around 2 percentage point higher than average of (other)
developing countries
 GDP growth rate of Bangladesh in FY2018-19: 8.11%
❑ Structural changes in the economy
 Share of Agriculture Sector in GDP declined from 31% in 1990 to
13.82% in FY 2018
❑ Per capita income (GNI) is on the rise
 Per capita GNI in nominal terms: USD 1909 (FY2019)
 Set to graduate from LDC to Developing country in 2024
 Graduated to lower middle income countries (LMIC) from low
income countries (LIC) in July 2015 (2014: threshold USD 1,045)

Importance of Trade
GDP = C + I + G + (X – M) or GDP = private
consumption + (gross investment + govern
investment) + government spending + (exp
imports).

Importance of International Trade
Export : Foreign Exchange Earning / Employment
dependency on Foreign Assistance
Import : Consumption (giving consumers greater
differentiated products) + Industrial raw material
Employment
Trade is not only increasing business activities, b
- generating employment opportunities for millions
- Skills development
- attracting foreign investment
- Innovation and entrepreneurship

Importance of International Tr
• Trade facilitates export diversification : ne
new materials and new production possibilities
• Trade encourages innovation and technolog
through foreign direct investment.
• Plays a role in the improvement of quality of g
labour productivity and environmental sta
• It increased competition and the exchange o
practices between trade partners and bu
in industry and product standards.

Contribution of Export earning in National GDP
FY Total GDP Export earning % of share in GDP
2010-11 128681.86 22928.22 17.82%
2011-12 133401.26 24301.90 18.22%
2012-13 149996.65 27027.36 18.02%
2013-14 172886.57 330186.45 17.46%
2014-15 194550.09 301208.94 16.04%
2015-16 221002.62 34257.18 15.50%
2016-17 249723.89 34846.84 15.25%
2017-18 274,025 36668.17 13.38%
2018-19 40535.04
Value in million US$

Export-Import Balance of Trade
FY Exports Imports Balance
10-11 22928 33657 -10729
11-12 24302 35516 -11214
12-13 27027 33969 -6942
13-14 30187 40693 -10506
14-15 31209 40639 -9430
15-16 34257 40036 -5779
16-17 34847 43666 -8819
17-18 36668 52953.4 -16285
18-19 40535 54964 -14429
Value in million US$

Transition in trade
• In case ofBangladesh three phases can be discerned as regards
integration of the Bangladesh economy
 Phase-1:Post-independence to late 1970s→ Protectionist,import-
substituting, inward looking
 Phase-2:Early 1980sto Early 1990s→ Gradual opening to global
markets
 Phase-3:Mid-1990sto currentperiod → Faster pace of global
integration
• Main featuresof Bangladesh’sTrade Policy: Trade liberalisation;
Deregulation;Reduction oftariffs;Removalof NTBs;Reduction ofanti-
export bias in the economy; import liberalisation

1972-73 2018-19
No. of Products 25 766 (H.S. Code 4 digit)
No. of Markets 68 202
Export Value 348.41 Mln. US$ 46828.80 Mln. US$
Exports ….

Trend in Export Trade from 1972-73 to 2018-2019
FY Export earning
72-73 348.41
82-83 443.43
92-93 725.82
02-03 6548
12-13 7027
16-17 34847
17-18 36668
18-19 40535
(Value in million US$)
0
5000
10000
15000
20000
25000
30000
35000
40000
45000
EXPORT

Export Earning of Bangladesh From Goods &
Sector
in million US$
FY Export Earning Total Growth (%)
Goods Service
2012-13 27027.36 2936.30 29963.66
2013-14 30186.62 3243.88 33430.50 11.57
2014-15 31208.94 3210.85 34419.79 2.96
2015-16 34257.18 3494.90 37752.08 9.68
2016-17 34846.84 3653.71 38500.55 1.98
2017-18 36668.17 4586.31 41254.48 7.15
2018-19 40535.04 6293.76 46828.80 13.51

01. Woven garments 42.54%
Six Items constitute
92.20% of the total
export figure .
02. Knit garments 41.66%
03. Leather & leather
products 2.52%
04. Jute & jute Goods 2.01%
05. Agricultural products 2.24%
06. Frozen foods 1.23%
Total: 92.20%
Shares of the Major Exportable during 2018-2019

Sector-wise Export Growth (2018-2019)
Sector Export Performance Growth
Woven garments 17244.73 11.79%
Knitwear 16888.54 11.19%
Leather and leather goods
(including footwear) 1019.78 -6.06%
Jute & jute goods 816.27 -20.41%
Agricultural products 908.96 34.92%
Frozen food 500.40 -1.58%
Others mfd. goods 3156.36 ------
Total export 40535.04 10.55%
(Value in million US$)

Regional Export Market Share (2018-2019)
Bangladesh Exports to 202 Countries
➢ European Region 56.38 %
➢ American Region 22.01%
➢ Asian Region 12.23 %
➢ Middle-east region 2.01 %
➢ African region 0.79 %
➢ East European Region 2.48 %
➢ Oceania Region 2.23 %
➢ Other Region 1.87 %

Major Country Wise Export Share (2018-2019)
Countries Export Performance Share in
total export
USA 6876.29 16.96%
Germany 6173.16 15.23%
UK 4169.31 10.29%
France 2217.56 5.47%
The Netherlands 1278.69 3.15%
Japan 1365.74 3.37%
Canada 1339.8 3.31%
Poland 1273.09 3.14%
Belgium 946.93 2.34%
Australia 804.63 1.99%
China 831.2 2.05%
Denmark 731.43 1.80%
Sweden 696.04 1.72%
Turkey 404.45 1.00%
Cz Republic 503.38 1.24%
Other Countries 10923.3 26.95%
Value in million US$

Preferential Market Access for Bangladesh
16
More than
80%
products of
Bangladesh
are enjoying
DFQF facility.
❖ EU countries, Australia, New Zealand, Japan, Norway, Switz
& Canada -under GSP scheme;
❖ China on 5054 products;
❖ South Korea on 4802 products;
❖ Thailand on 6998 products;
❖ India on all products except tobacco and
drugs under SAFTA scheme;
❖ Malaysia on 525 products;
❖ Chile on all products except wheat, wheat flour
and sugar;
❖ SAARC countries on some products under
SAFTA/SAPTA
❖ BIMSTEC scheme.

17
Challenges of Bangladesh Export
Only Six
products
dominate the
export;
❑ EU – 56.38%
❑ USA- 22.01%
❑ Other countries – 21.61
Limited Products
Limited Market

18
Solution Product diversification Market diversification

New export policy for fiscal 2018-19
fiscal 20-21 A policy to facilitate receipts of $60 billion
fiscal 2020-21.
❖ Highest priority sector
❖ Special development sector
❖ Special Development Service sector

20
Export Policy (2018-2021) has identified three cate
for product diversification:
❖ Highest priority sector
❖ Special development sector
❖ Special development service sector

21
❖ High end readymade garments and garments accessories;
❖ Software & IT enabled Services, ICT products;
❖ Pharmaceutical Products;
❖ Ocean going Ship & fishing trawlers building;
❖ Shoes & Leather Products;
❖ Jute goods;
❖ Plastic products;
❖ Agro-products & and Agro-processing products;
❖ Furniture Industry;
❖ Home textiles & Terry Towel;
❖ Terry Towel; and
❖ Luggage.
❖ Active Pharmaceutical ingredients (API) and Laboratory Reagent
❖ Home furnishing
❖ Ship and Oceangoing Fishing Trawler
Highest priority sector

22
❖ Jute diversified products;
❖ Electric and Electronic products;
❖ Ceramic products;
❖ Light engineering products including auto-parts & bicycles;
❖ Value added Frozen fish;
❖ Papadum;
❖ Printing & Packaging;
❖ Rough Diamond & Jewellery;
❖ Paper & paper products;
❖ Rubber;
❖ Silk products; Handicrafts;
❖ Handloom products including Lungi; and
❖ Coconut coir.
❖ Photovoltaic modules
❖ Peanut (Raw and Processed)
❖ Live and Processed Crubs
❖ Toys
Special development sector
Potential
sectors with
strong
production &
supply base

23
❖ Tourism;
❖ Architecture, Engineering and Consul
Services.
Special Development Service sectors are:

Bangladesh: 2018 Review Re
Criteria Threshold Score of
Bangladesh
Target
GNI Per Capita US$ 1,230 or
above
US$ 1,274 Achieved
Economic
Vulnerability
Index (EVI)
32 or below 25.2 Achieved
Human Asset
Index (HAI)
66 or above 73.2 Achieved

Bangladesh Graduation Confu
• Bangladesh will be a middle income country in 2021:
Answer: Bangladesh is already a lower middle income co
2015 by World Bank.
• Bangladesh will leave LDC status in 2021:
Answer: Bangladesh will leave LDC status in 2024.
• Bangladesh will graduate from the LDC to developing
Answer: All LDCs are developing countries. Bangladesh w
leave LDC status and be a non-LDC developing country.
+ =LDC Non-LDC
Developing
Countries
Developing
Countries

Bangladesh Graduation: Uniqu
• Double Graduation:
– Low-income to lower-middle-income country in 2015
– LDC graduation in 2024.
• Relatively bigger size economy and population.
• One of the first LDCs to graduate with
– large population
– sizable economy, exports and progress in poverty al
• One of the first LDCs to meet all three graduation crite
time of graduation.

Bangladesh Graduation: Uniqu Strong and improved GDP growth, declining depende
ODA Increasing but low in-flow of FDI. Manufacturing sector is getting stronger in Banglades
other graduating countries both in terms of share of t
added and share of employment. Second least productive labour force among graduati
and projected improvements at much slower rate tha
others (ILO, n.d.) Poor diversification of exports with concentration inde
compared to Bhutan’s 0.36 and Nepal’s 0.14 (UNCTA

Bangladesh Graduation: Unique
Country Graduating
Year
Population (mil) GDP (Bill)Types of Country
Botsowana 1994 2.29 17.41 Land locked
Cape Verde 2007 0.55 1.754 Small Island
Maldives 2011 0.44 4.6 Small Island
Samoa 2014 0.19 0.86 Small Island
Equatorial
Guinea
2017 1.27 12.49 Small oil
exporting
Bangladesh 2024 164.7 249.7 Manufacturing
Country

Trade Opportunities of Gradua Better country image. Improve credit rating Attract FDIs Better voice in trade negotiations. Forced capacity building of the
private sector. Preparedness of the public sector. Better understanding of trade
rules and game. More IP protection and encourage
innovation & creativity.

Main Factors of Competitiv GSP facilities:
 EU EBA (Everything But Arms scheme)
 GSP in Canada, Australia and Japan
 No GSP in USA since 2013 Favourable rules of origin: one stage
transformation, 30% value addition Cash incentives (Tk. 4,481 crore for all and
crore for RMG).

Bangladesh Export Challenges High concentration of
market High Concentration of
product Knitwear (61)
45%
Woven (62)
46%
Jute (53)
3%
Home Textile
(63)
3%
Footwear
(64)
2%
Fish &
seafood (03)
1%
Export Composition
EU
59%USA
17%
Japan
3%
India
3% Canada
3%
Australia
2% China
2% Others
11%
Export Market Share

Graduation Challenges: Market Loss of preferential Market Access DFQF in Other countries and RTAs (2024). Ineligible to enjoy preferential “Rules of Origin” (RoO). Single transformation or simply 30% value addition. Minimum market loss prediction: 1.8- 2.7 billion. UNCTAD Estimate: 5-7% of preferential export.
EU Market
HS Chapter Product Share in Export in
EU (2016)
GSP Tariff GSP+ Tariff MFN Tariff
(mostly)
61 Knitwear 53% 6.4%-9.6% 0 12%
62 Woven
garments
38% 5%-9.6% 0 12%
63 Home textile 2% 1.6%-9.6% 0 12%
64 Footwear 2% 0%-11.9% 0 8% or 17%
3 Fish, 2% 0 12-20%

Trade Preferences: EU Import R
in Apparels
EBA GSP Plus Standard GSP
Indicators LDC Vulnerable Countries that have
ratified 27 pre-specified
international conventions
Low or lower middle
income countries
No of Beneficiaries 48 9 18
Duty: Non-sensitive
goods
Duty suspension or no
duty for all goods
except arms & explosive
Duty suspension for around 66%
of all EU tariff lines
-Duty reduction for
around 66% of all EU
tariff lines z
Duty: Sensitive goods
-Specific duties
-Ad-valorem duty
Duty reduction
– 30%
- up to 3.5 percentage
points
Duty Suspension Duty suspension
Rules of Origin Single transformation
for apparels. For all
other products a
minimum local value
Double transformation for
apparels. For other products a
minimum local value added of
50%
Double transformatio
for apparels. For othe
products a minimum
local value addition o

Possibilities of Getting GSP
Condition for GSP Plus Bangladesh Position
i. Sustainable development Criterion: to
ratify and implement 27 international
conventions
Bangladesh fulfills criterion iii
Bangladesh willlikely meet criterion i
Bangladesh is high above the 6.5%
threshold
ii. Import Share Criteria: Share in GSP
covered imports must be less than 6.5%
of all GSP covered imports.
Standard GSP: Product graduation,
for clothing 57% of all GSP-covered
EU imports of clothing
BGD’s current share is more than 40
iii. Diversification criterion: at least 75%
of its total GSP imports coming from the
7 largest sections of GSP covered
imports
Note: GSP plus and standard GSP
ROO is more stringent than EBA ROO

Trade Challenges: Higher
Commitment
▪ Undertake tariff reduction commitment under WTO if Doha Roun
completed.
▪ Faster tariff reduction in FTAs & RTAs.
▪ Remove specific duties, regulatory duties and supplementary du
more import and worsen BOP.
▪ Withdrawal of TRIPS exemption: No assessment is yet available
▪ General transition period in 2021
▪ Pharmaceutical extension until 2033
▪ Rules of Origin & Subsidies will be major issues, particularly for
incentives (4-30%).
▪ LDC specific ISM (international support measures) and S&D (Sp
Differential Treatment) will be eliminated.

TRIPS and Pharmaceuticals
TRIPS* Exemption Post Graduation
Production and export of pharmaceuticals
without paying royalties to the patent
holders
Increase patent protection time from 1
years to 20 years
Allowing single ownership of firms and
investment
Protection of test data
Bangladesh will no longer benefits from
TRIPS waiver as soon as it is graduated
Remove export subsidies [5% on
pharmaceuticals and 20% on API (Activ
Pharmaceutical Ingredient)]
* WTO Agreement on Trade-Related Aspects of Intellectual Property Rights

Policy Dilemma Governmentprovides Cash incentiveswhich are
inconsistentwith AOA (WTO Agreementon Agriculture
and SCM (WTO Agreementon Subsidiesand
Countervailing Measures). Graduation impact is not wellunderstood by the priva
sector. No concrete study is yet available. Phasing outCashIncentives(Tk.4,481 crore):RMG
Tk2,284 crore & leather Tk.638 crore.Resistance from
the private sector vs.pressure from the WTO memb

Policy Initiatives
• Initiatives to get GSP+ (6.5% import threshold+ Minim
working age, good governance, compliance)
• Enhance productivity of the private sector to become m
competitive (Labour saving technologies?)
• Ease of doing business (Urgency vs reality)
• IP enforcement (Cost and benefit).
• Awareness of the private sector
• Develop API Capacities (How long).
• Quality improvement (Cost vs. return)
• Development of port capacities and infrastructure.
• Social compliance: workers rights and working environ

Negotiation Components Negotiating with WTO Members for Extension of TRIP
Transition Period until 2033 for the newly graduated L
(When and how). Continue EU EBA for another 03 years. (However, not
Current GSP scheme will expire in 2023). GSP plus negotiation Signing FTA (With whom and how). Inclusion Bangladesh at the Annex 7 list of WTO Subs
Agreement.

Way Forward: Better Market Ac
▪ Concerted efforts are to be taken for obtaining GSP+
▪ Initiate FTA/RTA negotiations with potential countries
▪ Diversifying export baskets & diversifying Markets
▪ Enhancing productivities.
▪ Ensure better compliance in factories.
▪ Enhancing overall trade-related capacity;

Graduation: Way Forward There is no explicittheoreticalframework for LDC graduatio
Bangladesh will have to develop its own. Graduation may increase FDI,butneeds strong professionali
and conducive economic and political regime in attrac Graduation should be accompanied with
 structural shifts towards high value added industries
 strengthening governance,
 mobilizing domestic resources,
 develop infrastructure and
 investment in human development.
 Improvement of ease of doing business

Conclusion Bangladesh passed a number of challenges in t
 Quota phase out on 2005
 Rana plaza
 US withdrawal of GSP in 2013. In social arena, Bangladesh has success stories
managing natural disaster, political crisis Bangladesh will boldly face the graduation chal Together we will make it happen!!