Tuesday, June 18, 2024
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WTO-MC13 outcome and implication for Bangladesh

AKM Asaduzzaman Patwary, Executive Secretary, DCCI            

WTO members gather biennially to make some decisions on multilateral trade issues for a smooth global trading system. The four-day-long WTO Ministerial Conference (MC13) was held in February in UAE which created tension and expectations for graduating economies with no exception for Bangladesh. Bangladesh will face the potential loss of various benefits including ISMs upon graduation in 2026. Though we have been declared eligible for graduation, the ongoing transition has significant impacts on Bangladesh both in the domestic and global arena requiring stricter compliance with WTO agreements. It requires reforms in trade regulations, investment policies, tariff plans, intellectual property rights, and modifications in other relevant policies including phase out of all export-related subsidies. Moreover, interaction with international partners will shift towards bilateral economic ties. Our economy has changed its priority on exports. Against this backdrop, WTO ministerial meetings always hold particular importance. This round of conferences resulted in many commitments and inferences. Before MC13, we expected that the Non-Agricultural Market Access (NAMA) products agenda, concession, and preferential treatment for graduating LDCs would get priority as a pressing agenda. Since WTO MC is a multilateral platform with multiple priorities and interests of all members, it is often difficult to solely get any agenda endorsed in this huge platform.

The WTOs 13th Ministerial Conference
Photo: The WTO’s 13th Ministerial Conference (MC13) took place from 26 February to 2 March 2024 in Abu Dhabi, United Arab Emirates.  (image courtesy-WTO)

In the given context, MC13 upheld priority considering the economic reality of Bangladesh as wide-ranging challenges are underway due to geoeconomic stress, global trade meltdown, and LDC-led transition. A brief assessment has been made regarding core decisions and discussions held at MC13. Of the core decisions, an extension of S&DT provisions for graduating LDCs till 2029 is a timely decision but it has limited significance in our current trade landscape, especially in major export avenues. The moratorium on customs duty for e-commerce extended until 2026. Several plurilateral agreements were reached covering service trade regulation and foreign investment facilitation. The fishery subsidy agreement and agricultural trade rule made some advancements but no decision was made.

Given MC13 outcomes, there will be some turn and twist in the local economy. In this regard, the likely challenges and gains for local industries and stakeholders are shared. Upon graduation, Bangladesh will lose important benefits-LDC-specific S&D treatment and a preferential export market. MC13 decided on technical assistance and capacity-building. Bangladesh could experience around 14.3% export loss due to preference erosion. While substantive outcomes are lacking, this agreement still holds significance for Bangladesh. Technical assistance and capacity building may indirectly help foreign trade competitiveness but can’t offset trade loss. Negotiations on S&D provisions of Sanitary and Phytosanitary measures (SPS) and Technical Barriers to Trade (TBT) reached an agreement. Improvement in skills development and technical assistance may benefit developing and LDC members like Bangladesh in lowering non-tariff challenges in foreign trade. These benefits are subject to mutual and bilateral agreements between the two countries. This agreement allows potential to strengthen product quality, and international trade compliance to sustain current markets and secure markets. This will be applicable once UNGA declares formal graduation. Moreover, it may offer scopes for potential industries to adapt to shifting economic reality, fostering greater participation in the global market. Bangladesh is advocating for the extension of S&D treatments till 2032 to support graduating LDCs but the inclusion of DFQF could be highly useful.

The decision on dispute settlement reform, a fully functional system by 2024, represents a positive indication for Bangladesh. Bangladesh faces usually challenges in dealing with trade disputes at the WTO Dispute Settlement Body owing to limited legal expertise, negotiation capacity, finance, and political factors. The reform on dispute settlement may assist us in gaining momentum in addressing pending cases to add value to the foreign trade process.

Discussions on agriculture prioritized global food security. However, member countries couldn’t agree on specific reforms due to disagreement over state support for farmers, foreign market access, and export restrictions. The conference acknowledged efforts from MC12 for the continuation of negotiations on agricultural trade rules. Key topics of this agenda included Public Stockholding (PSH) for food security, domestic support, market access, Special Safeguard Mechanism (SSM), export restrictions, etc. This disagreement over “public stockholding for food security may undermine food security in net-food importing countries. There was a request to exempt LDCs from restriction which are Net Food Importing Developing Countries (NFIDCs) and Bangladesh was excluded from this list. Since agro-product export does not include food grain and low-cost financing, low-cost utility and fertilizer subsidy privileges are given for food and farmers’ security, public stockholding and trade-distorting domestic support have minimal impacts for Bangladesh.

The absence of agreement on curbing fishery subsidies was notable despite the consensus at MC12 to prohibit subsidies on illegal fishing. The extension of the subsidy ban for maritime economic activities had no headway. The insignificant share, 4% marine resources share to the GDP of Bangladesh, requires infrastructural and financing capacity development for deep-sea fishing. With dependence on fisheries for protein, jobs, and economic growth, the fisheries subsidy decision is inevitable. Bangladesh is not equipped enough for optimum fishing in 200nm exclusive economic zone and 350 nm of sea bed which are far behind our capacity. The overfishing subsidy is largely irrelevant and may negatively impact direct stakeholders and livelihoods in this sector.

Regarding the IP protection regulation, LDCs are exempt from their enforcement under the TRIPS agreement. However, upon graduation, Bangladesh needs to adhere to patent and copyright regulations. Implication for Bangladesh entails adherence to copyright regulations under the TRIPS agreement escalating essential, life-saving medicines, and healthcare prices, and challenges for other large MSMEs to cope with the IP regime.

E-commerce moratorium prohibits customs duty imposition on electronic transmissions and it has been extended by WTO members. Developed countries advocate for its continuation while developing nations such as India, South Africa, and Indonesia expressed concerns about it. This disagreement may pose unilateral tariffs on digital goods hindering the nationwide digitalization spree. We support e-commerce moratorium to drive IT and ITES sector development including Hitech parks, e-commerce growth, and transformation of knowledge-based “Smart Bangladesh” by 2041.

Bangladesh has mixed observations on MC13 outcomes. We have achieved less than anticipated particularly a 3-year extension of S&D technical assistance, capacity-building, and e-commerce moratorium. However, indecision on TRIPS exemption and fishery subsidies agreement raises grave concerns and uncertainty. These issues demand greater diplomatic advocacy and efforts to retain the interests of Bangladesh and other LDCs.

Taking into account the MC13 outcomes effect in our economic context, we need robust preparation to cope with a new economic state like sustenance in a competitive world featured by maximum enforcement of compliance, regulations, lower trade, and tariff supports. Bangladesh is to set remedies aiming at the trade landscape based on other criteria in the new economic reality in 2026 making the friendly trade and industrial atmosphere. However, remaining local market industries and emerging service sectors need profound preparedness to sustain amidst the ever-changing geoeconomic context. With the steadfast aims, the private and public sectors need to plan and act together for import-substitute industries and private sect-led development addressing upcoming challenges as our prime agenda in the days to come.  

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