Pakistan’s commerce might be disrupted if Bangladesh more and more sources cotton from US to qualify for tariff concessio
ISLAMABAD:
The just lately concluded Bangladesh-United States commerce settlement underscores a well-recognized actuality of latest commerce diplomacy: when negotiating with Washington, leverage issues greater than aspirations. Just like the latest US agreements with India, this deal is markedly uneven. America has secured substantial business and regulatory positive aspects, whereas Bangladesh has obtained solely restricted reduction on its core export pursuits.
For Dhaka, america is the biggest single-country export market, absorbing round $8.7 billion in readymade clothes yearly, second solely to China total. Bangladesh’s overriding goal was due to this fact to safeguard its current market share and maintain the double-digit export development it has been recording just lately.
Towards this backdrop, Bangladesh seems to have settled for a marginal discount within the non-reciprocal tariff from 20% to 19%, the identical price presently utilized to Pakistan. It additionally appears that exporters are taking consolation in Washington’s settlement to allow a specified quota of clothes to enter at zero or decreased tariffs, supplied they’re produced utilizing US-origin cotton and man-made fibre.
Against this, america has secured substantial business advantages. Bangladesh has dedicated to buying $15 billion price of US vitality merchandise over the subsequent 15 years, $3.5 billion in US agricultural items comparable to cotton, soybean and corn inside one 12 months, and 700,000 metric tons of US wheat yearly for the subsequent 5 years.
It additionally agreed to present preferential entry to a broad vary of commercial items comparable to chemical substances, equipment, medical gadgets, ICT gear, and purchase 14 Boeing plane price roughly $3 billion.
Past tariffs and sourcing, Bangladesh has dedicated to dismantling a variety of non-tariff boundaries. It’ll settle for US requirements and recognise certificates issued by US regulatory authorities for well being, security, and different necessities. Whereas it will facilitate US exporters, on the identical time it narrows regulatory autonomy of Bangladesh.
The asymmetry is even clearer in digital commerce and providers. Bangladesh has agreed to take away non-tariff boundaries to digital commerce, providers, and funding, enable free cross-border knowledge transfers, help a everlasting WTO moratorium on customs duties on digital transmissions, and liberalise its insurance coverage market.
These commitments successfully lock in coverage decisions that many growing nations want to retain, significantly as knowledge governance and digital industrialisation change into central to financial sovereignty.
Bangladesh has additionally undertaken to strengthen mental property protections, increase environmental requirements, and curb discretionary preferences loved by state-owned enterprises. Whereas such reforms could also be defensible in their very own proper, embedding them as binding commerce obligations with out significant reciprocal market entry raises questions of steadiness and sequencing.
How would this settlement influence Pakistan’s commerce? Bangladesh is a crucial marketplace for Pakistan’s exports of cotton and associated merchandise, valued at roughly $700 million. This commerce might be disrupted if Bangladesh more and more sources cotton from america to qualify for tariff concessions on clothes. Moreover, Pakistan might face higher competitors in its largest single-country export vacation spot from duty-free exports of clothes constituted of the US cotton. These disadvantages would additionally apply to India.
There’s a clear lesson right here for growing nations presently negotiating commerce agreements with america: the Bangladesh mannequin might nicely change into the template. Of their pursuit of tariff reductions, they threat locking themselves into binding commitments that steadily erode home coverage house, significantly by limiting their freedom to supply from essentially the most aggressive world suppliers.
It’s troubling that the world’s richest economic system can require one of many poorest to undertake massive, assured purchases and settle for situations that Washington itself has been unwilling to decide to on the multilateral degree.
This highlights a tough actuality of Twenty first-century commerce diplomacy, at the least within the US context: guidelines are formed much less by ideas of equity or growth and extra by energy. Those that have leverage set the phrases; these with out it are compelled to regulate.
The author is a member of the Nationwide Tariff Coverage Board. He has beforehand served as Pakistan’s ambassador to WTO and FAO’s consultant to the United Nations
