Originally posted in The Daily Star on 24 March 2024
The recent 13th World Trade Organization Ministerial Conference held particular importance for Bangladesh as we are set to graduate from LDC status in 2026. TBS spoke to Professor Mustafizur Rahman, a Distinguished Fellow at the Centre for Policy Dialogue (CPD), who attended MC13
The MC13 was a forum for WTO members to discuss critical reforms, approve new multilateral trade rules and incorporate new members into the organisation. It took place from 26 February to 2 March 2024 in Abu Dhabi, United Arab Emirates.
Noted economist and Distinguished Fellow at the Centre for Policy Dialogue (CPD) Professor Mustafizur Rahman was a part of the Bangladeshi delegation at MC13. The Business Standard spoke to him to learn about his experience at the conference, how things went for Bangladesh and his takeaways from MC13.
What are the potential gains for Bangladesh from MC13?
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Bangladesh certainly had a lot of positives to take away from MC13. Several decisions were taken that will be important as Bangladesh graduates from the Group of LDCs in 2026.
First of all, the General Council’s decision regarding support for the graduating LDCs in terms of providing market access beyond the timeline for graduation was recognised at MC13. This means that the members who are providing support to Bangladesh as an LDC in the context of preferential market access have been requested to continue doing so beyond the timeline of LDC graduation.
But this would also mean that we will have to negotiate on a bilateral basis and find out to what extent and for how much time preferential market access will be extended beyond 2026.
As we know, the European Union and the United Kingdom have already indicated that they will provide preferential market access for an additional three years. We will now have to negotiate with other countries like Japan, China, South Korea and India. These countries are providing preferential market access under their LDC scheme which they have been urged to extend.
On the other hand, it also means that this decision does not apply to countries that do not have LDC schemes. For example, the United States does not have a specific LDC scheme, so this decision does not cover them.
Secondly, this is not a WTO decision that they will have to abide by. This is a request to the member countries to extend their LDC benefits to graduating countries beyond the timeline of graduation, so this is a best endeavour clause, not an enforceable clause.
During the General Council meeting, there was also another decision on Annex 2. Beyond preferential market access, LDCs could enjoy a number of other benefits as well. For example, under the TRIPS agreement, LDCs enjoy preferential treatment with regard to pharmaceuticals.
Bangladesh does not have to buy a patent and licence for patented drugs when we produce them here. So there are flexibilities and waivers from obligations that LDCs enjoy in the WTO, and there was another request that, beyond the graduation timeline, we enjoy some of these. But these decisions will be taken in the course of negotiations up to MC14, which will be held in Cameroon in 2026. So, there was no concrete decision on this matter.
We will have to see how the negotiations go over the next two years, up to MC14. While there is some opportunity, I don’t foresee much movement in this regard.
Members have been urged at MC13 to demonstrate due restraint with regard to taking any graduating LDCs to WTO dispute settlement on the ground that they have not complied with something that they should comply with as a non-LDC developing country. Under this due-restraint decision, after Bangladesh’s LDC graduation in 2026, we will not be taken to dispute the settlement mechanism of the WTO for three years.
We will also have to keep in mind that some of the decisions that are obligatory for developing countries will also be important for us as a future developing country member of the WTO.
From that perspective, for example, there was no decision on the fishery subsidies in which Bangladesh has an interest. The waiver that has been given under the fishery subsidies under the draft text states that countries that have a marine catch of fisheries of 0.8% of the global catch will not enjoy the waiver but Bangladesh’s share is more than 0.8%.
If the fisheries agreement is endorsed by, for example, MC14, we have a concern. We are now arguing that Hilsa should not be considered a marine fishery, so that is another issue in which we have a keen interest.
There also had an interest in the Peace Clause with regard to public stockholding, and that subsidies given to public stockholding procurements should not be considered under subsidy.
Bangladesh does not provide a lot of subsidies. In the Agricultural Marketing Service (AMS), the aggregate measure of support is 10%, or the equivalent of agriculture and GDP. India has a major stake in this and they wanted to make a peace clause stating that subsidies for government procurement will be considered green subsidies and will not be included in the subsidy measurement. But other countries didn’t agree to this so there was no decision. Bangladesh would have stood to gain if there had been a decision.
Another issue was a moratorium on e-commerce that was supposed to be expelled. Bangladesh has both offensive and defensive interests here as we both export and import e-commerce goods.
According to CPD estimations, because we are not imposing customs duties on e-commerce imports, we are losing about $40 million every year. So, if the moratorium on the imposition of e-commerce customs duties stops then we can impose customs duties, but the decision may be taken in MC14.
But as we also have offensive interests, I think that our stand will have to be a bit nuanced. If the moratorium continues, it is also not bad for us.
As a graduating LDC, we will have to take on a number of other obligations as well. For example, we will not be eligible to provide export credit subsidies. Bangladesh is now trying gradually to eliminate export direct subsidies.
We will also have to take on obligations regarding trade facilitation as a developing country. Overall, as a graduating LDC, Bangladesh has made some gains but we will have to keep in mind that at this moment we have three identities. We are an LDC until 2026; we are a graduating LDC, but we are also a future developing country. So, we will have to take all three perspectives and look at our interests from all three angles.
Are any specific facilities changing for Bangladesh in the coming days?
Yes, there will be a lot of changes as I mentioned. For example, the duty-free quota-free market access that we enjoy under 41 schemes will not be there three years after graduation. 70% of all our exports fall under the duty-free quota-free criteria. If other countries follow the EU and UK, they will not be there beyond 2029.
Similarly, the export subsidies that we provide will not be eligible to be paid beyond 2026. We also have to comply with the patent and licence regime under TRIPS which will not be there beyond November 2026. Bangladesh will have to make adequate preparations for life after graduation in the three additional years that we are getting.
We should make the best use of it to build our competitive strength, diversify our exports and markets, and also prepare ourselves for the obligations that we will have to take in many areas, such as agriculture, where we will have to comply with notifications, standards, certification, SPS, TBT standards, etc.
So, there will be an impact on our domestic compliance space and on the policies that we can pursue. Some of these will be limited. For example, in trade facilitation, we don’t have to take on any obligations now, but beyond graduation, we will have to comply with many trade facilitation measures at the port for our import stage so that those who are exporting to our country do not face any difficulties.
Notification of what measures we are taking will also increase in frequency. So, I think that we’ll have to prepare adequately for the impacts, some of which will be visible just beyond November 2026 and some beyond 2029.
We will have to make adequate preparations to continue to make our pharmaceutical sector competitive. For example, we are now setting up the Active Pharmaceutical Ingredients (API) Park in Gajaria, Munshiganj but it is taking more than 12 years to set up an Effluent Treatment Plant (ETP). The case is the same for our leather park in Savar.
We don’t have time to waste. We have to do these things very fast so that our industries remain competitive even when they don’t get preferential market access, be it in 2026 or 2029.
I think that the triangulation of investment, transport and trade connectivity, taking advantage of regional integration, attracting FDI, creating supply-side capacities and raising our competitiveness are all becoming very important.
Policy inertia and policy paralysis are two main obstacles for us. Are we ready to brave the challenges and maximise our gains?
I hope that we will come out of policy inertia because we have to. If our pharmaceutical sector is to remain competitive, we will have to get the API park up and running very soon. We import more than $1 billion of pharmaceutical ingredients. If we can produce these then even if we don’t get the preferences in terms of licences and patents, we can be competitive.
The same is true for leather and footwear. Enormous possibilities also exist in the light engineering and service sectors.
The market is moving at a fast pace, there is no room for inertia, and you are right that it has been one of the major binding constraints for our export and market diversification in the past. We don’t have any room for complacency.
I think that upgrading and blending our labour force with technology and skills both in terms of goods and service exports will become very important.
The compliance requirements are also changing. Although we have been given preferential market access for another three years, the preconditions are becoming very stringent. If we want to gain GSP Plus status then what is the scenario regarding labour rights? What is the scenario regarding gender rights, trading rights, good governance and all these environmental standards? All these are very important for market access.
So, whether we enjoy preferential market access or not, these obligations will become mandatory and we will have to build our capacity.
We will also have to build our capacity to negotiate free trade agreements (FTA) so that we can have better economic relationships with our neighbouring countries.
Vietnam has signed more than 50 FTAs, Comprehensive Economic Partnership Agreements (CEPA) and various other types of agreements. Bangladesh has only signed one preferential trading arrangement with Bhutan, which is a small partner. We will have to go for big economic partnerships with India, China, ASEAN and RCEP.
In the WTO, they say that countries get not what they deserve but what they negotiate. So, evidence, research and analysis-based negotiating capacity will become very important. Institutions and their capacity need to be strengthened further if we are to compete in the post-LDC world.
I think that our tasks are cut out for us and we will have to act without delay. If we can do that, we can continue our export performance and our remittance performance through partnerships. However, the CEPA and FTA that we are going to sign will not be as reciprocal as we were used to as an LDC. These will be based on either full reciprocity or less than full reciprocity.
Negotiating capacities and strengthening our competitive base will become very important if we want to negotiate CEPA or FTA. It will be based on give-and-take and on requests and offer lists. We will have to identify what we want, what we can give, and what our defensive, offensive and non-negotiable interests are.
We need to have good preparations, and if we can do that, we can incentivise our investors, scale up our workers, create mid-level professional management, and then take advantage of the special economic zones that we are now establishing.
The infrastructure is now well developed, so triangulation of infrastructure and transport, investment and trade connectivity will become very important in terms of dealing with post-graduation challenges.
What are your insights from MC13?
Well, MC13 has shown that WTO negotiations are becoming very complex. We have seen how various countries have their own interests and want to pursue them. It is very difficult to come to a consensus-based decision. There was no agreement on fisheries. There was no concrete agreement on e-commerce, the peace clause or public stockholding.
In terms of various negotiating agendas, countries take different positions. In the WTO, they call it variable geometry. There are coalitions based on various interests. There is no permanent friend.
Bangladesh will have to navigate that and maintain solidarity with the LDC group because, in the WTO, there is no group called graduating LDCs. There are LDCs, developing countries and developed countries. It is the LDCs which submit proposals in support of graduating LDCs, so that’s why it is important to maintain relations. Then we will also have to have the support of the G90, which is a group of LDCs and developing countries, India and China.
Many negotiations were going on outside of the WTO in MC13; these are called plurilaterals. There were plurilaterals on investment facilitation and e-commerce in which several LDCs participated. If there is a critical mass in a plurilateral discussion, they try to multilateralise it within the WTO. In MC13, one plurilateral discussion on service obligations was multilateralised.
24 LDCs participated in the trade investment facilitation discussion. China is a leader that is participating and they wanted to bring it to the WTO, but India and others didn’t allow it.
Bangladesh was not participating in any of the plurilaterals but the rules will be set over there and then we will have to oblige it if it is endorsed at the WTO. So, it’s better to participate and voice our concerns, both as a graduating LDC and as a future developing country.
Our state minister for commerce who led our delegation, our secretary of commerce and our ambassador from the Geneva Mission—all tried their best to uphold Bangladesh’s interests. Many other LDCs and graduating LDCs look up to Bangladesh because we have the capacity to undertake negotiations from a position of strength.
Bangladesh even participated in some of the green room negotiations, which are very limited.
Bangladesh will have to take the lead as an LDC and as a graduating LDC. Also, I realise that as we are a future developing country, we have to keep that particular lens in mind during negotiations being held between now and the future till MC14.
We will also have to keep in mind that out of the 183 special differential treatments that are provided in the WTO under the 16 major agreements, 25 are LDC-specific, and the other 158 are for developing countries. Therefore we have some flexibility as a developing country member of the WTO in terms of how to take advantage of the special and differential treatment.
In fact, many of our fellow members were reminding us in Abu Dhabi to start thinking as a developing country. That’s why Bangladesh’s delegation took an active interest in e-commerce, public stockholding, fishery and subsidy discussions. As we are a future developing country, we should take an active interest in all negotiations from that lens.