The Financial Express

FTA beckoning - between a rock and a hard place

| Updated: May 23, 2018 21:19:26

FTA beckoning - between a rock and a hard place

Is the trade jinx finally over? A series of commercially-driven activities of late suggest we may be opening new windows. Negotiations with Thailand, a high-powered commercial visit to Cambodia, which is to be reciprocated next year, Indonesia staging its first exhibition in Dhaka, may be just what the doctor ordered for surviving in the middle-income league. It is hard to think of Bangladesh staying aloof from the rest of the world by not having any free-trade agreements (FTAs), the signature tune of maturing in the neo-liberal order. Previous preferential trade-talks with Myanmar and similar negotiations with Malaysia convey an evolving long-term FTA interest. Indeed, it would be economically suicidal to believe we can climb up the middle-income ladder without a few as anchor.

Playing with a double-jeopardy may be the name of the game. On the one hand, production and employment would be threatened if we opened up our trade-windows completely; yet, on the other hand, not many potential importers would likely or easily open theirs to low-waged transactions from upwardly-mobile countries such as Bangladesh. We did not have the need to bat an eyelid on this issue since our ready-made garment (RMG) sector was raking in the cash for our daily meals and more; and no high-income textiles-producing country had any interest to equalise the commercial playing-field. This status quo could have been frozen for a long chunk of our future had not a generation or more of RMG income raised the country's income threshold and public appetite.

True, RMG income was not the only catalyst, as spiralling remittances also played their part, but the point should not be missed: the stature that rises and opportunities that open for developing countries also come riddled with responsibilities. FTA instruments serve as pathways to those opportunities, with the inherent logic being that the more there are of the former, the wider the windows for the latter. Similarly, the noblesse oblige high-income approach to underdeveloped countries must also give way to converting complacent instruments for a competitive market. In other words, let the bulls run amok in any market, and we must prepare to handle them, one by one, eventually, learning from our baptismal experiences and sharpening our tools constantly.

This may be why India will be a tough nut to crack in our FTA quest. Our sprawling neighbour contains many pockets where the socio-economic and socio-political contexts that bear upon low-waged or even farm production are no different than Bangladesh's resilience to changes even as resources to expand. The classic case is India's jute sector, which defiantly and robustly resists our exports in an area of huge and untapped comparative advantage for both Bangladesh and West Bengal (where India's industrialisation would profit more from jute divestments). This same bottleneck is also evident with our RMG exports: India could easily become our top RMG market without these constraints, so that the income earned would automatically spiral back to India through our evident lust for Indian-manufactured goods like electrical, automotive and software products. That was the original FTA fountain, worth a lot more for both countries than what bilateral trade can presently muster, and what spawns a huge and growing smuggling industry.

Learning from these lost opportunities, we can plunge in other contiguous areas, like Southeast Asia and China. Fortunately, our commercial authorities and relevant private-sector leaders have plunged into these areas, with the aforementioned cases of ongoing FTA talks with Thailand, emerging on the Cambodian agenda, and rounding a meaningful Indonesian corner with Indonesia. With Burmese, Chinese, Malaysian, Singaporean, and Vietnamese windows also being explored, one geographical space of increasing interest is gradually emerging. Because it captures many countries at various stages of the underdeveloped-developing transitions, we have as much to learn, give, share, and be challenged by. A more suitable script would be harder to find.

Where we go from here is not hard to see if our economic progress instinct is stronger than our political. Given our own transition, that is, from the lowest development rung upwards, we have the least to lose from socio-economic and socio-political costs: if not RMG income, remittance earnings have been changing the face of our families, villages, and individual expectations, meaning that resistance can be relatively minimal at the lower social end, as is predictable, but perhaps too entrenched at the upper-end where RMG owners and manufacturers belong. Easing them into the earlier kind of changes recommended for Indian jute and RMG production, and given the reforms conducted after the 2013 Rana Plaza disaster in many (though not all, by any means) RMG plants, may be the time is ripe for greater FTA salience in our policy-making.

Success on the Southeast Asian front, where India also has deep interests that actually make Bangladesh a possibly profitable and more viable stepping stone, and forays with China, our largest trading partner and India's foremost emergent commercial rival, would help us to sell the FTA idea to India far easier. It will not happen overnight, but negotiations over the next decade or so would provide us our own stepping stone into a higher middle-income rank, boasting more globally competitive industries than just agriculture (jute), fishing, and low-waged (RMG sector) manufacture. Our potential already unraveling with pharmaceuticals, bicycles (extendable to motor-cycles), shipbuilding, even innovative jute-built by-products, could then do what the RMG sector is currently doing: the higher the productive thresholds, the more deserving the income-ladder climb.

Finally, we could then hit the jackpot: cracking the high-income markets in European and American continents. Recalling how our Trade and Investment Cooperative Framework Agreement (TICFA) engagement with the United States was confusing and meaningless from the very beginning, and how the GSP (generalised system of preferences) evaporation, along with several other noblesse-oblige gestures given to underdeveloped countries, will be the ground realities we will face in the coming decade. If our FTA wheel is already spinning by then, we have the chance to crack some very forbidding markets. Remembering how the socio-economic and socio-political costs will also be impacting those very high-income countries, in fact, even deeper and faster than they will our own economy, we can clearly see a viable pathway into becoming a developed country by mid-century. In a transient world, though, we have to act; and given how competitive the field, we must act now.

Dr. Imtiaz A. Hussain is Professor & Head of the newly-built Department of Global Studies & Governance

at Independent University, Bangladesh.

[email protected]



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