As vowed, the US President Donald Trump scrapped Trans-Pacific Partnership (TPP) deal by an executive order within a couple of days of his inauguration. The much-hyped TPP have had ripples long back in the process of the US election. Possible scrapping of TPP by Mr. Trump also figured prominently in the TV talk-shows in Bangladesh to analyse its possible impacts on the country's economy.
Interestingly, World Bank Economist stationed in Dhaka made his reflections in this matter while interviewed recently by a local English daily. He was quoted as suggesting: "if TPP is not signed it will be a piece of good news for Bangladesh. But it is not good news for the world trade because it will weaken the foundation of the multilateral trading system".
Essentially, the question arises whether the decision of the US administration is indeed good for Bangladesh. The remarks made by WB economist have two interesting elements: i) 'not signing of TPP will be a good news for Bangladesh' and ii) 'MTS (Multilateral Trading System) will be weakened'. This write-up analyses the possible impacts of Trump's decision on Bangladesh.
In the post-World War-II global order the big powers, led by the US, agreed to create an international trading regime and established GATT (General Agreement on Tariffs and Trade). Under GATT, all member states agreed and engaged in negotiations to reduce and ultimately eliminate tariff which was considered the main impediment for free flow of international trade - an engine of growth. In this process, under Marakkesh Agreement (1994) WTO was created (January 01, 1995) for a fully liberalised and globalised world trade. Multilateral trading system embodied in WTO became absolutely rule-based. Accordingly, after years of hectic negotiations, all WTO members agreed to initiate DOHA Round of negotiations ( popularly known as DDA - Doha Development Agenda) in November 2001.
Interestingly, Brazil, India, China and other developing countries made huge strides for benefiting from the Special and Differential preferential treatment offered to developing countries under WTO. In the wake of last global economic downturn, the US and others started arguing, the emerging economies (BRICS -Brazil, Russia, India, China, South Africa - countries) have grown more rapidly than the rest of the world (though these economies have also been experiencing slowing down). And, the emerging economies should make 'commensurate contributions to the liberalisation of world trade'. That is, they should take more responsibilities and contribute to trade and development by opening up their economies in terms of lowering and eliminating the tariff and other restrictions (subsidies) in trading goods, services, and agriculture.
Conversely, Emerging Economies continue to argue that they are still developing countries and 'development' is very crucial for them and their people. They need to be shielded by appropriate 'Special and Differential Treatment' and 'Special Safeguard Mechanism' (SSM) for their interests under WTO. Most importantly, they strongly maintain that they have hundreds of millions of people in abject poverty.
The US and others (e.g. EU, Australia, Canada, UK, Japan) couldn't make any headway while promoting their interests in the negotiations in WTO ( a universal global body where all members are equal and the decision has to be taken on consensus basis) in some areas including agriculture. Essentially, there has been no substantive progress of the DOHA round. In fact, many critics suggest that its has already become a 'dead round'.
Therefore, in the recent years (parallel to DOHA negotiations) the founding leaders of WTO like the US and few others have been indulging in creating regional trading agreements such as TPP undermining the existing universal multilateral trading system (MTS) created by themselves. Essentially, the broader membership, including BRICS countries, other developing countries, African countries, LDCs, SVEs, etc., couldn't welcome such a development. They considered departure from MTS cannot be good for world trade and development. The US and others also created plurilateral arrangements for services which goes against the spirit of MTS. The TPP and other plurilateral arrangements have been widely considered a parallel mechanism of MTS and a manifestation of 'protectionism' and essentially, against globalisation.
WTO DG, Mr Roberto Azavedo, at the Joint Annual meeting of the World Bank and IMF in Washington in last October emphatically urged for "new Globalisation push" against the 'growing threats of protectionism'.
In this context, it will be truly misleading if TPP is considered a multilateral trading arrangement. TPP, whether it is signed by US or otherwise, will not serve the interest of countries like Bangladesh. The US, during DDA negotiations was not necessarily found fully committed and balanced towards the interests of LDCs particularly for duty-free, quota-free (DFQF) market access to the US (though the other developed countries/blocs such as EU, UK, Canada, Australia, New Zealand had already offered and implemented this). Both the Republican and the Democratic administrations in the US were not found much interested in giving equal treatment to all LDCS while offering preferential market access to the US. They maintained a clear African LDCs-favoured package like AGOA.
Scrapping of TPP definitely cannot be considered as weakening of MTS rather the reverse. The 12 member states of TPP would together represent 40 per cent of world trade. And, solutions of any problem of MTS should rather be explored within the WTO but definitely not creating another regional (strategic) arrangements. LDCs group represents merely 1.0 per cent plus of world trade.
But with the US withdrawal from TPP, countries like Bangladesh cannot afford to rejoice. White House Press Secretary Sean Spicer already indicated, "This executive action ushers in a new era of US trade policy in which Trump administration pursue bilateral trade opportunities with allies around the globe", which is a clear manifestation of protectionist stand. Even, President Trump didn't indicate that his administration would give particular attention to the weaker economies (like LDCs) for their mainstreaming to the MTS and early graduation from LDCs to middle-income countries. He also did not indicate any interest in concluding DOHA round under WTO for the benefit of all, on a fast track basis.
Interestingly, some members of Bangladesh Garments Exporter Association (BGMEA) found very relieved of Vietnam's possible tension with the scrapping of TPP. Yes, Vietnam must be concerned of the new development. But Vietnam had kept the ratification of TPP on hold before US President's stand on TPP was announced. Vietnam is a reality for Bangladesh. Whether TPP or not, it will continue to grow fast and will take the bigger pie of US market for garments. Its consistent open door export-led policies attracted phenomenal growth of foreign direct investment (FDI) which is a dream for any LDC. On the other hand, Bangladesh's graduation to middle-income country from LDC will be a big challenge. Bangladesh cannot continue with DFQF for long. It has to find its way to become competitive. And, BGMEA is expected to be prepared for diversifying tariff lines and markets with much required efficiency.
Bangladesh, as a member of LDCs bloc, has been immensely benefited from the MTS as equal to others. Among all LDCs, it fully exploited the generous preferential regime of MTS and created a phenomenal garments and textile sector, created millions of jobs and thus reduced poverty and made the poor and women empowered. Another stunning success is the pharmaceutical sector. Bangladesh took the full benefit of TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights) flexibility for pharma products under WTO. Definitely, the government played a catalytic role in making the garments and pharma products globally competitive. And, the economy has now visibly turned around with a very high image under the astute and visionary leadership of the Prime Minister.
Given the ground reality and emerging global trading scenario, Bangladesh should continue its engagement fully committed to MTS. It should also engage with the new US administration with credible and well-researched statistics and arguments to establish how the suspension of GSP (Generalised Scheme of Preferences) facilities negatively impacted Bangladesh and convince the US to revisit the GSP for Bangladesh including garments and textile products. Trade bodies should also be immediately forthcoming finding innovative ways and means to buttress the government's engagement with the US administration.
The writer is a former Ambassador.