It is reported that Bangladesh has signed the Trade and Investment Co-operation Framework Agreement (Ticfa) with the US in Washington DC on November 25. Bangladesh Commerce Secretary and Deputy USTR Wendy Cutler signed it on behalf of their countries. The Bangladesh cabinet endorsed Ticfa in June after negotiating with Washington for almost a decade.
The Ticfa is not a binding contract. It is a framework for establishing a forum between the US and Bangladesh to tap business and investment potentials of both countries. Bilateral meetings will be held once a year between the two governments under this institutional platform
The agreement emphasises on prohibition of protectionist trade policies, and in the 16-parargraph preamble, the protection of intellectual property rights, the role of the international anti-corruption convention and its importance, the protection of labour rights (including in the EPZ areas) and WTO commitments of both countries are stipulated
It cannot be denied that Bangladesh seeks trade and investment from the US and other countries. Most economists say that investment up to 34% of the GDP (currently GDP of Bangladesh stands at $130 billion) is needed in the next three to five years to cut poverty and to become a middle-income country by 2021. In this respect, private international capital flows, particularly foreign direct investment (FDI) are vital complements to national development efforts.
During the last 42 years, as per the latest Bangladesh Bank survey report, foreign direct investment (FDI) from the US stands in 7th position with $25.6 million in January-June 2012. Majority of the FDI came in the gas and petroleum sectors ($13.5 million) followed by banking ($8.9 million).
To promote trade and attract investment from the US, it is desirable to have an institutional bilateral forum in which both sides at least annually can sit to explore the potentials for furthering trade and investment in Bangladesh.
In its absence, the US argues that trade and investment to Bangladesh will be slow. They also argue that they have established such bilateral forums with many countries including Sri Lanka.
According to some economists, the Ticfa will: Work to remove impediments to bilateral trade and investment, increase US investment, promote technological know-how in Bangladesh, promote labour rights according to ILO standards, and make efforts to curb corruption.
Those who are in favour of this agreement argue that there needs to be a forum where the two countries may discuss trade-related and investment issues on a regular basis, and it is up to the skill and capacity of negotiators of Bangladesh how to get favourable facilities from the US. The US cannot unilaterally impose unfavourable facilities on Bangladesh.
It is amply demonstrated that since 2002, the agreement was under negotiation with Bangladesh and the US has to change the name of Tifa to Ticfa in case of Bangladesh.
It is reported that both parties are to meet in January in Dhaka to discuss the future course of US investment and trade-related issues. Bangladesh may also raise the duty-free and quota-free entry of ready made garments to the US market. The suspension by the US of GSP facilities to Bangladesh will come up in December but if the decision is negative then this issue will also come up for discussion in the January meeting.
If Washington provides Bangladesh the duty-free and quota-free access to its products enjoyed by more than 30 other “least developed countries,” the US would at a stroke contribute more to economic security and women’s empowerment than it has with years of aid shipments. There is no guarantee in the Ticfa regarding duty-free access of garments to the US.
With regard to trade with the US, during the fiscal year 2011-12 the bilateral trade volume was reported to be $5.8 billion with the second-highest position with a trade surplus of $4.4 billion, constituting 25% of total exports and imported from the US goods worth about $1.09 billion. The balance of trade is heavily in Bangladesh’s favour.
Despite being a LDC, it is noted Bangladeshi garment exporters continue to pay about 15.3% duties to the US. It is reported that in 2012, these tariffs have yielded Washington $749.7 million from Bangladesh which pays more to the US as duties than it gets aid annually from the US. China and France pay much less tariffs (5%) for their goods to the US. It sounds illogical but it is true.
The word “trade” occurs in the Ticfa title, but it seems, the US has given more emphasis on services sector in which the private sector of the US is interested to invest in Bangladesh. This remains a concern to Bangladesh investors. In Bangladesh economy services sector plays a significant role and at present this sector constitutes 49% of the economy.
Critics allege that Bangladesh has signed TICFA this time to please the US and it is a politically motivated decision ahead of the polls in the country.