Govt to conduct feasibility study for FTA with EU

The government will begin a feasibility study soon to identify priority areas for negotiations on a free trade agreement (FTA) with the European Union (EU).

The move aims to protect preferential trade benefits after the country graduates from the group of least developed countries (LDCs) to developing-nation status in November next year.

On signing the trade deal with the EU, Commerce Secretary Mahbubur Rahman said the ministry will hold an inter-ministerial meeting next month to take a formal opinion from other ministries, departments and agencies of the government.

"A meeting planned for today [yesterday] to discuss the feasibility had been deferred due to other commitments and rescheduled for next month," Rahman told The Daily Star yesterday.

Focus now shifts to free trade deal as stringent terms make achieving GSP Plus difficult

The EU is Bangladesh's largest export market, taking more than $25 billion worth of goods each year, or over 60 percent of the country's total shipments.

At present, Bangladesh enjoys duty-free access to the EU. The EU has already granted the country a three-year extension of zero-duty facilities until 2029.

After that, exporters will face tariffs of about 12 percent without an agreement. The country's major export competitors, such as India and Vietnam, have already signed FTAs with the bloc.

Parallel to the FTA, Bangladesh is also negotiating with the EU for GSP Plus trade benefits, which would allow duty-free access even after the LDC graduation.

The Generalized Scheme of Preferences Plus, or GSP Plus, is a special EU incentive arrangement that grants duty-free access for vulnerable developing countries to the European market.

To qualify, however, countries must ratify 32 international conventions. Four of these, covering good governance, human rights, labour rights and environmental protection, are considered core and have strict conditions.

Rahman said Bangladesh has already signed most of the conventions, but four to five conventions are difficult for Bangladesh to ratify because of having many stringent conditions.

The secretary said that a free trade agreement might be a more practical option, since such deals involve fewer strict conditions and allow issues such as trade in goods, services and Rules of Origin to be negotiated and improved jointly.

Even if Bangladesh secures GSP Plus status, its main export item, garments, may still not qualify for benefits.

Because, under the safeguard clause of the EU GSP Plus, a six percent threshold applies to any specific product. Bangladeshi garments have already crossed 21 percent across all criteria.

Another rule caps a country's share of imported clothing under the EU LDC, GSP and GSP Plus categories at 37 percent, but Bangladesh has already crossed 50 percent.

Mohammad Abdur Razzaque, chairman of local think tank Research and Policy Integration for Development (RAPID), said, "Bangladesh will have to negotiate intensively with the EU for the removal of such stringent conditions if it wants to obtain the GSP Plus status."