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Dhaka Tribune

BD-Japan FTA to impact Indian exports to Bangladesh

Cuts International predicts that India's exports could be affected if BD offers zero duty on all products to Japan under the FTA

Update : 22 Apr 2024, 06:36 PM

An Indian think-tank Consumer Unity & Trust Society (Cuts International) has warned India about the possible impact of the proposed Bangladesh-Japan Free Trade Agreement (FTA) on its trade with Bangladesh.

The report -- a quarterly analysis by Cuts Dossier on Preferential Trade Agreements and India released recently -- recommended that India "exercise caution and closely monitor the progress of the Bangladesh-Japan EPA negotiations."

Cuts International anticipated that India's exports to Bangladesh could be adversely affected if Bangladesh offers zero duty on all products to Japan under the FTA, which is scheduled to be signed by December this year.

Several products in sectors such as automobiles, metals, electricals and textiles may be largely impacted by the Bangladesh-Japan FTA, according to the Cuts International analysis of possible scenarios.

As Bangladesh seeks to expand its trade relations with Japan, the Cuts report recommended that India assess the potential impact on its own trade interests and competitiveness in the region.

The report suggested that India may need to consider strengthening its existing trade ties with Bangladesh, diversifying its export markets, enhancing its competitiveness and exploring partnership opportunities to navigate the changing trade dynamics effectively.

The report said while India has a Preferential Trade Agreement (PTA) with Bangladesh and there is the Agreement on South Asian Free Trade Area (SAFTA), addressing these concerns is crucial to maintaining India's export performance in this market and neutralizing the shocks posed by future FTAs that Bangladesh may engage in.

Bangladesh is not a big competitor for India in terms of access to the Japanese market, as India already enjoys a tariff advantage in Japan due to its Comprehensive Economic Partnership Agreement (Cepa), according to Cuts International analysis.

However, the report warns that India should assess the possible impact of Bangladesh's fast-growing textile and apparel sector, including footwear, which is gaining a comparative advantage over time.

However, the Cuts International analysis using its Smart methodology suggests that India is unlikely to experience significant market share loss for textile and apparel products in Japan.

The analysis also suggested that any reduction in India's exports of certain textiles, apparel, and footwear to Japan would likely be negligible.

While Bangladesh's current export value to Japan remains lower than India's, the gap is narrowing due to Bangladesh's export growth.

Bangladesh's exports to Japan reached $1.70 billion in 2022, compared to below $1 billion in 2013.

Bangladesh's exports to Japan are dominated by various types of readymade garments and footwear for both men and women, contributing 55% of its total exports to Japan.

India's exports to Japan began a steady rise in 2016 after a three-year downturn in 2013-2015.

This growth continued after the Covid-19 pandemic. However, the overall value of India's exports to Japan has declined, falling from nearly $8 billion in 2013 to $5.70 billion in 2022.

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