Bangladesh has topped the list of Commonwealth countries that would face the greatest absolute effects in terms of the extra import duty it would have to pay under possible new tax bill after Britain's departure from the European Union (EU), or the so-called Brexit.
The possible trade effects of Brexit on Bangladesh exports to Britain markets was forecast in research papers published by the Commonwealth Secretariat.
Bangladesh is followed by India, Pakistan, South Africa, Mauritius, Seychelles, Ghana, Sri Lanka, Kenya and Papua New Guinea.
“Bangladesh faces overwhelmingly the largest absolute hit, but proportional to current exports
the worst affected state would be Seychelles, followed by Mauritius,” the report stated. Because this ranking focuses on countries with large exports to the UK, it can obscure serious relative impacts on small states, it added.
This issue of Commonwealth Trade Hot Topics analyses “Brexit” and shows that the effects for some Commonwealth countries may be severe unless specific actions are taken to avoid this, said the report.
UK, the third largest single export destination for Bangladesh, is very important for Bangladesh as the exporters enjoy duty-free market access for all products under Generalised System of Preferences (GSP) under the EU trade agreements.
It is apprehended that if Brexit is executed, Bangladesh may lose duty free access and have to pay tax in exporting goods to Britain.
According to the Export Promotion Bureau (EPB) data, in the fiscal year 2015-16, Bangladesh earned $3.80 billion exporting goods to the UK, of which a lions share cane from the RMG sector. Bangladesh exported clothing products of $3.52bn during this time.
“If Bangladesh has to pay tax after the execution of Brexit, it will lose competitiveness in the UK market, which will cast shadow on the country's industry especially the clothing sector,” Khondaker Golam Moazzem, additional research director of the Centre for Policy Dialogue (CPD), told the Dhaka Tribune.
For keeping existing trade benefits from the Britain government and to remain competitive in its markets, “Bangladesh government has to negotiate with the UK government,” said Moazzem.
The negotiation can be held in two ways – as an individual country and the government. Bangladesh can use the Least Development Countries (LDCs) platform to negotiate with the UK to enjoy benefits of the developing countries, said Moazzem, adding that the World Trade Organisation (WTO) could also be used in the negotiation.
The Commerce Ministry has to asses the probable effects on the industry and set the agenda for negotiation to remain safe, said Moazzem.
According to the Commonwealth analysis, the major industries especially the export-oriented ones of the Commonwealth nations would have to face massive hits, if proper measures are not taken.
The RMG sector may face trouble in export earnings as it enjoys duty-free market excess to the UK and earned $3.52bn in the last fiscal.
“Since the UK government has decided to exit from the European Union, from now the government has to take preparation for bilateral negotiation to keep the existing trade benefits for Bangladesh in place,” Exporters' Association of Bangladesh (EAB) President Abdus Salam Murshedy told the Dhaka Tribune.
“But I think, the trade benefits will remain the same after the Brexit as we have good trade relationship with Britain,” he said, adding that the government should go beyond the RMG sector.
“We have to look on the other trade relationships as there are many expatriates in the UK and we export consumers goods too,” he added.