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Preparing for the Trans-Pacific Partnership?

  • Published at 12:03 am November 12th, 2016
Preparing for the  Trans-Pacific Partnership?

One of the most pressing items before the United States Congress in its upcoming lame-duck session, or at the onset of its new session in January will be the ratification of the Trans-Pacific Partnership (TPP) which was signed in February this year by 12 countries in the Pacific Ocean Basin.

Simple numbers tell a story of the gigantic potential of TPP: Those 12 countries hold almost 900 million consumers and account for almost 40% of the world’s GDP.

The treaty will go into effect once all countries ratify, or two years after countries combining up to 85% of the pact members’ gross national product have ratified -- whichever is sooner.

In reality, this means that countries where dialogue and debate have to take place because of independent executives and multi-party legislatures will be delaying the birth of the TPP trade area longer than nations like Brunei or Vietnam which, like Bangladesh, have monolithic governance structures with party, executive, and legislative entities fused as one.

For Bangladesh, the stakes couldn’t be higher. As the TPP protocols seek to harmonise (and eventually remove) tariff structures, regulatory frameworks, intellectual property laws, environmental and human rights across its members, it is inevitable that eventually there will be a preference towards trading within the bloc rather than outside.

With a significant portion of Bangladesh’s textile trade being marketed to North American buyers and the potential for export of further value-added products in pharmaceuticals and information technology to TPP members US, Canada, Australia, and New Zealand, it is not inconceivable that many of these developed countries may just find fellow members Vietnam, Peru, and Malaysia more attractive for the import of the same products.

This will depend, of course, on the speed with which tariffs and regulations are harmonised across the bloc, and also upon the cost differential between the same product/service that is exported from Bangladesh and from a TPP pact competitor.

As more products and services yet unknown are developed, especially in non-traditional sectors, those outside the TPP might find entry into their future markets a harder task as well given that the TPP members will have had a head start.

With Bangladesh’s potential for export of value-added products to TPP members, it is not inconceivable that many of these developed countries may just find fellow members Vietnam, Peru, and Malaysia more attractive for the import of the same products

Combined with the concerns with American Generalised System of Preferences (GSP) rules, which right now continue not to cover Bangladesh, the impact on Bangladesh’s current and potential export sectors could be significant, and in a bad way, as a result of TPP coming into effect in the next couple of years.

The more optimistic of the policy-makers and civil society types have suggested that alternative blocs like BIMSTEC or APEC or something else with a catchy name and catchier alphabet soup moniker could be an antidote for TPP blues. That is being more hopeful than common sense would warrant.

The overarching fact is that when it comes to high-return consumer markets for Bangladeshi products and services today and in the near future, replacing the United States, Canada, or Australia with, say, India, China, or Russia is simply not an option given the need, purchasing power, and indigenous capacity of the latter set of countries.

So, the Trans-Pacific Partnership (TPP) will likely go into effect sometime towards the end of 2017. What is Bangladesh doing to prepare for it in realistic terms? One option would have been to explore seriously the possibility of joining it.

The problem with that approach is that the pact is part of the Anglosphere’s broader strategy of containing the influence of China and, to a lesser degree, India, and the current Bangladesh government’s visible dependence on those two Asian countries makes it an unlikely candidate for TPP expansion, were that expansion even a possibility.

A second mitigating option would be to create swiftly the environment that could bring Bangladesh back under the aegis of GSP. This is easier said than done as the arrested efforts of the last couple of years have shown. So far, the incumbent government seems to have made half-hearted efforts, if that, to address specific concerns of Washington about labour and environmental rights specifically, and democratic governance broadly.

The third response could very well be getting a larger market share in a giant consumer market like the European Union. The issue with that would be that already 90% of EU’s Bangladesh imports are textiles, leaving little room to grow in this sector -- especially with the new agreements with North African countries putting them into play as exporters too.

Herein, there has been some growth in the export of services from Bangladesh, with the sector’s trade deficit in EU’s favour reduced by about a third between the 2012 and 2015 fiscal years. In other words, there is a possibility of growth in some non-traditional export sectors for European consumption. The caution would be the volatility of EU itself, in the aftermath of Brexit which has triggered similar thoughts in other countries.

The important thing is to be prepared as TPP comes to reality sometime next year. So far, it has been hard to detect concrete action plans that reassure that such preparation is in the offing.

Esam Sohail is an educational research analyst and college lecturer of social sciences. He writes from Kansas, USA.

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