Regional Trade Agreements and Bangladesh

Bangladesh is the member of several regional and sub-regional trade agreements (RTAs). The regional agreements include Preferential Trade Agreements (PTA) and Free Trade Agreements (FTA).

Bangladesh is party to the following PTAs:

(i)       Asia-Pacific Trade Agreement (APTA);

(ii)      Trade Preferential System among OIC Countries (TPS-OIC);

(iii)     Preferential Trade Agreement among D-8 Member States (D-8)

(iv)     Preferential Trade Agreement between Bangladesh and Iran; and

(v)      Agreement on SAARC Preferential Trading arrangement (SAPTA);

The tariff concessions allowed under the PTAs vary in terms of product coverage as well as the margin of preferences. The rules of origin criteria those have to me met to be eligible for tariff concessions are also slightly different. Among the above mentioned PTAs, the margin of preference is higher in case of APTA.

The D-8 PTA is yet to be ratified by Bangladesh. But the administrative process is going on and it is expected that Bangladesh will soon become a contracting party of the agreement.

 

Bangladesh is party to the following FTAs:   

(i)  South Asian Free Trade Area (SAFTA);

(ii)  Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC)  

Among the FTAs mentioned above, SAFTA is in fully  operational while the BIMSTEC is yet to be functional.

Bangladesh is party to the following Sub-regional initiatives:

      i. South Asia Sub regional Economic Cooperation (SASEC);

    ii. BCIM (Bangladesh, China, India & Myanmar Economic Cooperation), also known as Kunming Initiative.

 

Tariff Concessions & Rules of Origin under APTA

The first regional agreement in the Asis-Pacific region, called "Bangkok Agreement", was signed in 1975. Then with its first amendment in 2005 the "Bangkok Agreement" was 

reorganized and renamed as the "Asia-Pacific Trade Agreement (APTA)". Its present six Participating States are Bangladesh, India, Laos, South Korea, Sri–Lanka and China.

The 3^rd Round on Tariff negotiations concluded in 2009, which is still in operation. The 4^th Round negotiation has been concluded and has been announced during the 4^th Ministerial Council held in Bangkok, Thailand on 13 January 2017. Mongolia is in the process of formally acceding to APTA as a new Participating State. The 4^th Round negotiation on tariff concession is expected to be implemented from 01 July 2017. Under the 4^th Round products under 10,677 HS codes will get tariff preference.

 

The Summary of tariff preference under 4th round negotiations of APTA is as follows:

Country	Concessions
	To all Member States		To Least Developed Countries
	Number of Products	Margin of Preference	Number of Products	Margin of Preference
Bangladesh	598	10%-70%	4	20-50%
China	2,191	5-100% (19 duty free)	181	0-12.5%
India	3,334	5- 100% (205 duty free)	47	14-100% (16 duty free)
South Korea	2,796	10-50%	961 (for Bangladesh)	20-100% (876 duty free)
Sri Lanka	585	5%-62.5%	75	10-50%
Lao PDR	999	20-37.5%	Nil	Nil
Mongolia	333	10-30%	Nil	Nil

 

The following three Framework Agreements under APTA have been signed and ratified by the Participating States:

            (i) Agreement on Trade facilitation,

            (ii) Agreement on investment and

            (iii) Agreement on Liberalization of Trade in Services

 

Rules of Origin under APTA

The rules of origin criteria followed in APTA are given below:

(i)   In case of single country content, value addition requirement is 35% for LDCs and 45% for non-LDCs, and

(ii)  In case of regional cumulation, local content requirement in 50% for LDCs and 60% for non-LDCs.

 

Tariff Concessions under SAFTA

Under SAFTA India, Pakistan and Sri Lanka are categorized as Non-Least Developed Contracting States (NLDCs) and Bangladesh, Bhutan, Maldives and Nepal are categorized as Least Developed Contracting States (LDCs). Afghanistan became the eighth member as an LDC member from 14th SAARC Summit, 2007.

 

The Tariff Liberalisation Program (TLP) under SAFTA has commenced from 1 July, 2006. Under the 1st Phase of SAFTA-TLP, all the NLDCs have brought down their tariffs to 20%, while LDCs have brought down to 30% by 2007. Following the 1st Phase in the 2nd Phase of the TLP the NLDCs are to bring down tariffs from 20% to 0-5% with in 2012 (Sri Lanka by 2013), while LDCs are to do so by 1^st January, 2016. This TLP would cover all tariff lines except those reserved in the Sensitive Lists (negative lists) of the member states. The 3rd Phase of TLP is under negotiation.

Sensitive Lists under SAFTA

Sensitive List (SL) is the list of products on which the member states does not provide any tariff concession. The products outside of the SLs are considered for tariff concession under the TLP. Recently, SLs have been revised and 20% items of total number has been withdrawn from the SLs. The number of products included in the revised SLs of the Member States are as follows. 

 

   Table 2. Member Country wise revised sensitive lists

Member State	Number of Products in the original Sensitive Lists	Number of Products in the Revised Sensitive Lists (Phase-II)
(1)	(2)	(3)
Afghanistan	1072	850
Bangladesh	1233 (LDCs) 1241 (NLDCs)	987 (LDCs) 993 (NLDCs)
Bhutan	150	156
India	480 (LDCs) 868  (NLDCs)	25 (LDCs) 614 (NLDCs)
Maldives	681	154
Nepal	1257 (LDCs) 1295 (NLDCs)	998 (LDCs) 1036 (NLDCs)
Pakistan	1169	936
Sri Lanka	1042	837 (LDCs) 963 (NLDCs)

 

Rules of Origin under SAFTA

 

The rules of origin criteria followed in SAFTA are given below:

General Rule:

 

(i)   In case of single country content, value addition requirement is 30% plus CTH for LDCs and 40% plus CTH for non-LDCs and;

(ii)  In case of SAARC cumulation, along with CTH regional content requirement in 40% for LDCs, 50% for non-LDCs, with the requirement of 20% value addition in the exporting country and;

(iii) For Srilanka, 35% value addition plus CTH is required in case of domestic content and 55% regional content plus CTH in SAARC cumulation

                           

Product Specific Rules (PSRs) of Origin:

191 HSCodes (at 6 digit level) are subject to PSRs for securing tariff preference. 189 HScodes out of 191 are subject to CTSH+30% value addition and the rest 2 items are subject to only CTH.

 

Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC FTA)

In order to form a BIMSTEC FTA, a framework agreement was signed in February 2004. The framework agreement covered (i) trade in goods, (ii) trade in services, and (iii) investment. In respect of tariff reduction process, BIMSTEC FTA has adopted fast track and normal track approach. Under the fast track approach non-LDCs (India, Sri Lanka and Thailand) will complete tariff reduction process (TRP) for LDCs (Bangladesh, Myanmar, Bhutan and Nepal) on the selected items within a year and for non-LDCs within three years. Conversely, LDCs will complete the same under the fast track approach within five years for non-LDCs and within three years for LDCs. Under normal track approach non-LDCs will complete TRP for the LDCs on the selected items within three years and for the non-LDCs within five years. On the other hand, LDCs will complete TRP for non-LDCs on the items selected under the normal track approach within ten years and for LDCs within six years. Although BIMSTEC FTA on Trade in Goods was scheduled to commence from 01 July 2011, it has not yet been implemented as the negotiation is yet to be complete.  

SAARC Preferential Trade Arrangements (SAPTA)

SAARC Preferential Trade Arrangements (SAPTA) was signed on 11 April 1993 comprising seven countries of SAARC aimed at enhancing mutual and balanced trade and economic cooperation. The member countries of the agreement are Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan, and Sri Lanka. Under this agreement tariff reduction programme (TRP) started from December 1995 and four rounds of tariff negotiations were concluded. At the end of the fourth round of negotiations, tariff concession on 6,243 products were exchanged, out of these 3,942 products are for LDCs and 2,301 products are for non-LDCs  Non-LDC member countries have given tariff concession to LDCs from 05% to 100%. In the case of rules of origin, 40% value addition is applicable for non-LDCs and 30% for LDCs. SAPTA has been progressed to SAFTA in January, 2004.

 

Trade Preferential System among OIC Countries (TPS-OIC)

A Framework Agreement on Trade Preferential System among OIC Countries (TPS-OIC) was signed in 1991 with a view to expanding trade within the OIC countries. Bangladesh has signed the agreement in 1997 and ratified in 2004. Subsequently, under the purview of Article 13 of the Framework Agreement, a Trade Negotiating Committee (TNC) was formed consisting representatives from the member countries aimed at expanding trade among the member countries. TNC has drafted the Protocol on the Preferential Tariff Scheme (PRETAS) for the TPS-OIC through four successful trade discussions. Bangladesh has signed PRETAS on 24 November 2006. Each Member State has to reduce tariffs on 7% of its total HS lines. As an LDC Bangladesh will have facility to complete tariff reduction programme (TRP) in six equal annual installments while other member countries have to complete it in four annual installments. The Agreement has come into force from 05 February, 2011. Meanwhile tariff reduction schedules have been exchanged among the member countries for starting of TRP.

 

Preferential Trade Agreement among D-8 Member States (D-8)

An Agreement among D-8 Member States (D-8) was signed in 1997 comprising eight developing countries from OIC bloc with a view to introducing preferential trade arrangement. Bangladesh signed the Preferential Trade Agreement among D-8 Member States (D-8) in 2006 though it has not yet been ratified. Under the Tariff Reduction Modality (TRM) of D-8 as an LDC Bangladesh will have to complete tariff reduction in eight annual installments while other members will have to complete it in four annual installments. Moreover, as an LDC Bangladesh will have additional three years as a grace period for removal of para-tariffs and non-tariff barriers. It has come into force but Bangladesh did not sign the Agreement on Rules of Origin due to divergent views on value addition criterion. Bangladesh claimed 30% value addition but other member countries suggested Bangladesh to be the contracting party first with ratification. They have also assured that Bangladesh proposal of relaxed rules of origin will be considered by other members when she becomes party. The latest development is that ratification process for Bangladesh is ongoing.