A Mixed Bag: Japan-Bangladesh EPA Raises Concerns and Opportunities
The recent economic partnership agreement (EPA) between Bangladesh and Japan has sparked a lively debate among businesses and trade experts. While some see it as a strategic move, others highlight potential risks for the country's economy, especially as Bangladesh nears its graduation from least developed country (LDC) status.
A Strategic Move, But at What Cost?
Business leaders are generally optimistic about the EPA, believing it secures duty-free access for Bangladeshi garments and other products in the lucrative Japanese market post-LDC graduation. This is a significant win for exporters, who have long been concerned about losing this advantage.
The agreement also includes a trade facilitation chapter, promising a more efficient business environment, and detailed anti-corruption provisions. One notable measure is the potential for traders to be fined for misdeclaring imported goods, which experts believe could reduce arbitrary harassment of businesses.
However, not everyone is convinced that the benefits outweigh the risks.
Potential Challenges and Lost Opportunities
Under the EPA, Bangladesh has agreed to grant Japan duty-free access to a wide range of products, including garments, fabrics, accessories, and various other goods. Additionally, Bangladesh has committed to gradually eliminating tariffs on Japanese car imports over a 12-year period.
Mohammad Hafizur Rahman, a former director general of the WTO Cell and a member of Bangladesh's EPA negotiation team, has identified several potential challenges for domestic industries. He notes that while Bangladesh's plastics industry is capable of meeting domestic demand and exporting abroad, Japanese plastic products will now enter the local market duty-free.
Similarly, Bangladesh has offered duty-free access to Japanese glass and light engineering products, despite being self-sufficient in glass production and having export-oriented firms in the sector. Hafizur warns that this could undermine domestic producers who lack the scale and technology to compete.
In the jewellery sector, a promising and fast-growing industry with export potential, Bangladesh has granted Japan duty-free access for all types of metals and jewellery, which could impact local businesses.
The pharmaceutical industry is also affected. While Bangladesh exports medicines to many countries, benefiting from LDC flexibilities, Japanese medicines and protective devices will now enter Bangladesh duty-free. In contrast, Japan has not extended reciprocal duty-free access to Bangladeshi leather products, the country's second-largest export after garments.
Intellectual Property Rights: A Double-Edged Sword
Under the intellectual property rights chapter, Bangladesh has agreed to accede to several international protocols typically implemented by developed economies. One such protocol is the Patent Cooperation Treaty (PCT), which allows companies to seek patent protection in multiple countries through a single application.
Hafizur Rahman warns that if Bangladesh delays its LDC graduation by three years while implementing these agreements, the country could lose LDC-related benefits despite retaining the status formally. Before graduation, Bangladesh has benefited from a market for imitation products, with electronic items copied from Japanese brands often manufactured locally, providing employment and affordable access to modern products.
Strict enforcement of intellectual property rules could disrupt these activities, increasing costs and reducing employment. Hafizur also highlights the widespread use of copied foreign books and software, practices that are common even in countries like India. He emphasizes the challenge of extending intellectual property concessions granted to one country to all countries, impacting all sectors.
Mostafa Abid Khan, a former member of the Bangladesh Trade and Tariff Commission and part of the EPA negotiation team, agrees that signing the PCT obligates Bangladesh to grant patents, even if LDC graduation is delayed.
Commerce Secretary Mahbubur Rahman, however, downplays fears over intellectual property provisions in services, stating that there is no reason for Bangladesh to be alarmed about IP-related conditions in that area.
Restrictions on Subsidies and E-Commerce: A Level Playing Field?
The agreement restricts Bangladesh from providing subsidies in transportation, logistics, and computer services, including freelancing. Hafizur argues that withdrawing subsidies could allow Japanese firms, with their greater capacity, to dominate logistics and transport projects, leaving local companies at a disadvantage.
Abid opposed including the subsidy chapter during early negotiations, warning that Bangladesh could incur losses if it could not support logistics and transport development.
The EPA also prevents Bangladesh from imposing tariffs on Japanese goods imported through e-commerce and includes conditions on cross-border data transfers, an area where Bangladesh currently lacks adequate regulatory and technical capacity.
Impact on Key Industries: Garments, Cars, and Agriculture
In the garments sector, Japan will continue to grant duty-free access to Bangladeshi exports, but Bangladesh has offered reciprocal duty-free treatment for Japanese garments, accessories, and cotton. Hafizur and Abid caution that this could affect the local textile sector, especially as Bangladesh has begun producing higher-end fabrics in certain segments.
The EPA mandates the complete elimination of all import-related duties on Japanese vehicles over 12 years, potentially eroding government revenue. Despite lobbying efforts, Japan did not offer zero tariffs on Bangladeshi leather products, deferring the issue to future negotiations. Similarly, Japan did not grant duty-free access for all agricultural products.
Business Voices: Focus on Capacity Building
Syed Ershad Ahmed, president of the American Chamber of Commerce in Bangladesh, emphasizes the need for capacity building. He highlights the lack of focus on reducing logistics costs, developing skills to enhance workforce productivity, and the limited progress in research and innovation to meet evolving global demands.
Ahmed also points to regulatory bottlenecks and customs hassles, calling for full automation of customs clearance for raw material imports and an enhancement of cargo handling capacity at Chattogram Port to reduce export lead times. He stresses that cutting corruption, ensuring public order, and meeting energy demands are crucial for investment, adding that merely signing EPAs or FTAs will not bring results.
And This Is the Part Most People Miss...
While the EPA offers opportunities, it also presents challenges and potential losses for Bangladesh's domestic industries. The agreement's impact on sectors like plastics, glass, light engineering, and pharmaceuticals could be significant, especially if Bangladesh's capacity to compete with Japanese products is limited. The strict enforcement of intellectual property rules and restrictions on subsidies could disrupt local industries and employment, while the lack of reciprocal duty-free access for key Bangladeshi exports like leather and agriculture products is a cause for concern.
Controversial Take: Is the EPA a Win-Win or a One-Sided Deal?
Some experts argue that the EPA favors Japan more than Bangladesh, especially considering the potential risks and losses for domestic industries. Others believe that the agreement provides a strategic opportunity for Bangladesh to access the lucrative Japanese market and attract investment, despite the challenges. What do you think? Is the EPA a win-win situation, or does it favor one party over the other? Share your thoughts in the comments below!
