The Regional Comprehensive Economic Partnership (RCEP), which accounts for nearly 30 percent of the world’s population and GDP, is a triumph of ASEAN multilateralism and middle-power diplomacy.
And although the Wall Street Journal dubbed it “Paper Tiger,” it could script the future of Asia, bringing together for the first time three of the continent’s four largest economies – China, Japan and South Korea – under the same umbrella.
With RCEP aiming to pull the global economic center of gravity towards Asia, Bangladesh has expressed interest in joining the mega partnership. But with India’s pullout, critics are now questioning whether Dhaka has acted cautiously in showing interest in the group.
Currently, Bangladesh is associated with only a few multilateral economic alliances such as D8, APTA and SAFTA. Since 1976, the country has experienced sustained trade deficits due to the low volume of exports. After being removed from the list of least developed countries, Bangladesh’s exports to the RCEP region will face tariff and non-tariff barriers, which will worsen existing trade deficits.
The ASEAN-centric initiative aims to boost intra-RCEP exports by removing trade barriers, reducing costs and minimizing lead times, which is a better business model than navigating the many complex FTAs across the country. Asia.
FTAs in Asia complicate cross-border trade by increasing transaction costs, triggering trade protectionism and minimizing overall operational efficiency. RCEP will allow Bangladesh to avoid the complexities of Asian free trade networks and provide a lasting remedy for the “noodle bowl effect” that traps new budding traders in a preferential treatment network.
Moreover, Bangladesh’s dream of regularly engaging with ASEAN for decades will be realized by joining a platform like RCEP, which promises bigger business opportunities than ASEAN.
By comparison, the “RCEP treatment first” among member states is intended to create a multitude of opportunities for Bangladeshi businessmen, who compete for access to stable markets. Larger than the European Union, RCEP’s relatively resilient supply chain has the potential to ensure lower production costs for Bangladeshi entrepreneurs, resulting in quality products at affordable prices for consumers.
In particular, the Bangladesh e-commerce industry – which is expected to reach a valuation of around $ 3 billion by 2024 – will benefit from duty-free access to the world’s largest e-commerce market in South Asia. -East. However, the most important benefit of joining RCEP is that it will pave the way for Bangladesh’s transformation into a manufacturing hub by opening up unexamined opportunities, exploring new avenues of economic cooperation, and providing RCEP developed members a feasible option to relocate their “twilight industries”.
At the heart of Bangladesh’s interest in joining RCEP – and perhaps beyond simple cost-benefit comparisons – is the discussion of compatibility with the country’s comparative economic advantage. Just by being in the partnership first, regional competitors like Vietnam already have the upper hand. With each passing day, the difference between the export earnings of Dhaka and Hanoi can only increase.
To compound concerns, Dhaka is also on the brink of duty-free access to some of the RCEP countries, like Australia, pending the inevitable expiration of those deals as the country becomes a developing country. At the very least, RCEP offers Bangladesh the opportunity to continue to access duty-free or at reduced tariffs to much larger markets.
As an extension, membership in RCEP also enables investment aid, trade facilitation and logistical support that can give Bangladesh a positive impetus to attract FDI, develop value chains and prepare the country for a transfer. knowledge as interactions between global market experts and local industry leaders. will be destined to grow.
However, the biggest challenge in joining RCEP is to grant other members access to Bangladesh’s domestic market, potentially worsening the trade deficit.
The intense competition resulting from the entry of foreign suppliers will put pressure on domestic companies to improve the quality of local products. Currently, Bangladesh enjoys duty-free access without the need to reciprocate at the national level. But a RCEP membership changes that reality, forcing businesses to adapt and improve at a much faster rate.
One likely remedy available to the Bangladeshi government is to address these multidimensional challenges in a much more robust manner than in the past. This is not to say that Dhaka should do its homework and design an economic plan with short, medium and long term goals, but rigorous impact assessments become the need as market access and basket diversity of products become an integral part of negotiations before joining the partnership. In short, economic planners must ensure that the tariff losses do not outweigh the benefits of being a member of RCEP.
Bangladesh has two options: join the RCEP which brings together several FTAs under one unified system, or sign an FTA separately with each RCEP member to avoid losing market share to competitors. Signing multiple FTAs individually involves a lengthy negotiation process, greater complexities with a greater possibility of failure.
Joining RCEP will boost Bangladesh’s economy, especially in the context of the pandemic-induced slowdown. It will link Bangladesh to regional and global markets and send a positive signal to foreign investors.
When evaluating Bangladesh’s decision to board the RCEP train, it is imperative to consider how Bangladesh can access the RCEP markets and assess whether the terms and conditions involved provide a net benefit to the RCEP. economy. Only then will the challenges and benefits of this puzzle all be put together to provide a clear picture.