Bangladesh has little to benefit from China’s duty-free market access

Bangladesh cannot take the advantage of duty-free market access of its 98 percent of products to the Chinese markets because of a low export basket.

As a result, the colossal trade deficit that heavily tilted towards China is getting bigger and bigger, said an official of the commerce ministry.

The annual trade deficit of Bangladesh against China was close to $11 billion in the last fiscal 2020-21, statistics show.

The commercial wing of the Bangladesh embassy in Beijing in a recent letter said that the Chinese market is huge but very competitive. “Only good quality foreign companies can compete with their local manufacturers,” reads the letter.

According to Bangladesh Bank data, the country imported goods worth around $55 billion in FY20. Of this, $11 billion or 20 percent came from China alone. Bangladesh’s import bills rose to $65 billion in FY21, so the share of China grew proportionately.

On the other hand, China’s imports aggregated a whopping $2.4 trillion from across the world in 2019-20, of which, Bangladesh’s share was less than 1 percent ($600 million).

Amid such a huge trade deficit between the two countries, China introduced duty-free access to 98 percent of Bangladeshi products under its tariff line from July 2020. But that did not work well to reduce the widening trade gap.

Recently, the government has proposed that China include leather and leather products under its duty-free list of products. Even after availing of this facility, the commercial wing of Bangladesh in Beijing thinks that it will be extremely difficult for Dhaka to benefit much from Beijing in terms of fetching more revenues with the conventional products.

In the letter sent to the commerce ministry the commercial wing of the embassy has explained the reasons why Bangladesh’s exports were not increasing in China.

The commercial wing of Bangladesh is saying that the demand for high-value products will continue to grow in China. At present, in order to increase exports to the Chinese market, there must be a massive promotion of quality products and these products should be made available online, too.

Bangladesh does not export any of China’s top 20 most-imported products, said the letter. Therefore, it is not possible to occupy the Chinese market in any way with conventional items, the commercial wing of Bangladesh’s mission in Beijing pointed out in a memo to the commerce ministry.

In this regard, Commerce Secretary Tapan Kanti Ghosh told the Business Insider Bangladesh that the government is working to expand the export markets to other countries including China to meet its post-graduation challenges.

“Obstacles to increasing exports to China are being identified and addressed. This will make it easier for China to take full advantage of the benefits it is providing to Bangladesh,” he added.

In the last few years, the Commercial Wing had reviewed the top 10 products exported from Bangladesh to the Chinese market. The review found that exports of all three of the five conventional products declined. On the other hand, exports of five non-traditional products have increased. Conventional woven apparel, knitwear, fisheries, trusses, and molasses have been declining.

The Bangladesh embassy says that in 2021, 9.76 percent of China’s total imports came from Taiwan. China also imports significant quantities of goods from Japan, South Korea, the United States, Australia, Brazil, Vietnam, Malaysia, Russia, Thailand, Indonesia, Chile, Italy, Canada, India, and South Africa.

“Our garment exports to China declined as the buyers are more interested in high-end products,” said Mohammad Hatem, executive president of BKMEA, while talking to the Business Insider Bangladesh on Saturday.