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TPP deal signed: What BD should do

| Updated: October 18, 2017 04:09:56


TPP deal signed: What BD should do
Trans-Pacific Partnership (TPP), one of the world's biggest multinational trade deals, was finally signed by 12 member nations in New Zealand last week. The deal, which will cover 40 per cent of the world economy, has already taken five years of negotiations to reach the signing stage. Yet, analysts say the massive trade pact will still require years of tough negotiations before it becomes a reality. 
At a grand ceremony in Auckland marking the signing of the agreement, New Zealand Prime Minister John Key said the signing is 'an important step' but the agreement 'is still just a piece of paper, or rather over 16,000 pieces of paper until it actually comes into force.' 
The TPP is expected now to undergo a two-year ratification period in which at least six countries -- that account for 85 per cent of the combined gross domestic production of the 12 TPP nations -- must approve the final text for the deal to be implemented. The 12 nations include Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, the United States and Vietnam.
Given their size, both the United States and Japan will require to ratify the deal, which will set common standards on issues ranging from workers' rights to intellectual property protection in 12 Pacific nations.
There is widespread grassroots opposition to the TPP in many countries. Opponents have criticised the secrecy surrounding TPP talks, raised concerns about reduced access to things like affordable medicines, and a clause which allows foreign investors the right to sue if they feel their profits have been impacted by a law or policy in the host country. 
      Analysts fear that Bangladesh might lose its competitive edge in global apparel business after the signing of the trade pact. Local exporters may face an uneven and tough competition. The deal is seen as the most sweeping trade liberalisation pact in a generation. It is aimed at cutting trade barriers and setting common standards for 12 countries. More than 18,000 taxes imposed by various countries on the US products will be eliminated under it, when it comes into effect. The deal could reshape industries and influence everything from the price of cheese to the cost of cancer treatments.
At present, Bangladesh garment exports to the USA are subject to 15.62 per cent duty that are paid by the importers there, whereas Vietnam's RMG exports are subject to only 8.38 per cent import duty. The deal, when it becomes operational, will make Vietnam's garment exports to the American market completely duty-free. But Bangladesh's duty-advantage on garment exports to some other TPP member-countries -- Canada, New Zealand, Japan, Australia and Chile -- might also be affected by the new trade deal.
Investment decisions by global entrepreneurs, according to some analysts, will furthermore be effected by the new trade deal, making countries like Vietnam a stronger candidate as the preferred destinations, due to their zero-duty access to the markets of other TPP countries.
For that matter, it is crucial for Bangladesh to reduce the cost of doing business to maintain the country's competitiveness in international trade. It should also look for opportunities to join such a mega deal, as some other countries are also reportedly planning to do so.
Besides, the country needs to focus on new international markets, particularly those where its exports enjoy duty benefit. Diversification of the country's apparel items is another critical area for more value addition. Productivity in the factories has also to be raised to cushion against any probable losses in garment exports.
According to a study, if TPP adopts flexible rules of origin on sourcing, as favoured by Vietnam, it could boost its share of the growing apparel market from 4.0 per cent to 11 per cent, while Bangladesh's share in this market has remained almost static -- between 7.0-8.0 per cent. Currently, Vietnam is at a comparative disadvantage in the RMG sector mainly due to its higher costs of production including higher wages.
Until now, Bangladesh has been able to retain its edge in the sourcing world in spite of the higher import tariff on its export than those of Vietnam. But it is likely that TPP, when it comes into force, will trigger some trade diversion from Bangladesh to Vietnam.   
Bangladesh trade officials, regulators, associations and the civil society members need to pay special attention to the implications of the TPP and other incoming free-trade deals that are shaping the '21st-Century Trade Policies'. The fear about Bangladesh finding itself in a situation where it loses its current position as the world's second largest apparel exporter is quite worrying. 
However, if the country takes appropriate moves to be involved in, or associated with TPP in one form or other, it may find its niche in textiles, leather and services. But if it does nothing, there is a possibility for a potential slowdown in the growth of its RMG sector.
It is high time for Bangladesh to revamp and reshape its trade policy and related actions so that it can be better prepared to face the situation that may herald the beginning of a new era of trade liberalisation globally through 'mega-regional' agreements.
Long-term impacts of the TPP on the Bangladesh economy will be more important than short-term ones. Joining any effective regional initiative can provide some cushion to Bangladesh in the long term to stay competitive in the global economy.      
 

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