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FTA with neighbours

The New Nation, Bangladesh

FTA with neighbours


21 July 2005

THE Ministry of Commerce has decided to engage consultants to conduct a study and identify benefits and possible risks of signing bilateral trade agreements like Free Trade Agreement (FTA) with neighbouring countries. Free trade agreement is for allowing barrier-free trade among nations in the era of globalisation. FTA has both positive and negative effects on the domestic industrial sector of any country. If the bad effects outweigh the good ones then FTA should not be implemented in the greater interest of the country. Notably, the multilateral South Asia Free Trade Agreement (SAFTA) is supposed to be launched from January 2006 within the SAARC region.

Bangladesh needs to have certain principles based on correct evaluation to support the industrial sector before implementing SAFTA. Whether it will sign bilateral free trade agreements with all its neighbouring countries is a very important question at the moment. All the countries in the South Asian Association for Regional Cooperation (SAARC) may not prove to be beneficial to Bangladesh if it engages in trade with them through SAFTA. A thorough study is thus needed to be certain about the prospects and risks of FTA with neighbouring countries. The ministry has taken a good decision to engage consultants to do the study.

Usually various types of tax barriers are created on imports to protect domestic industries with a view to saving those from external shocks though it is contrary to the globalisation concept. There are many industries in Bangladesh, which are not as strong as those in India. Indian poultry industry is very strong. Indian eggs, chicks, and poultry feeds are cheaper than Bangladeshi ones because of the strength of poultry industry there. If FTA is implemented between the two countries, the poultry industry in Bangladesh will be all but destroyed. Most of the investors in the poultry industry will then be compelled to either shut down their units or start marketing Indian poultry products.

To protect the domestic industries from external shocks Bangladesh has to take intelligent decisions in respect of implementation of FTA with SAARC nations. The country needs to effectively utilise the findings of the study to be able to benefit from SAFTA. Calculated steps are needed before allowing free trade in areas where FTA may not prove useful. The study being undertaken by the Ministry of Commerce needs to clearly identify the net effects of FTA with different SAARC nations. It should be precise enough in proper identification of benefits as well as risks. The ministry needs to take all steps with a view to ensuring accuracy of findings of such an important study.