International relations

Towards a New Economic Frontier: Bangladesh’s Pursuit of RCEP Membership

dhakathinks8 months ago8 months ago9110 mins

Naziba Mustabshira

After August 5, 2024, the interim government has been trying to broaden Bangladesh’s geopolitical horizons. During the previous regime, Bangladesh was very conscious of its neighboring country, India, regarding any foreign policy decision. However, now strategic alliances might be the factor that outlines the future of Bangladesh’s economy after such a colossal shift. The Regional Comprehensive Economic Partnership (RCEP) is a monumental opportunity for the country.

The RCEP comprises 15 nations, including the economic powerhouses of China, Japan, and South Korea, which collectively represent 30% of the global GDP. This free trade agreement facilitates unrestricted trade in products, services, and investments across the Asia Pacific, with a total population of over 2.3 billion.

As Bangladesh prepares to graduate from the LDC category in 2026, it faces the threat of losing preferential trade benefits. The country is already on unstable ground with the European Union regarding its LDC graduation. According to WTO, Bangladesh can face up to 11.2% tariff rise. Therefore, it is essential for the country to seek better and safer alternatives, and a membership or partnership within RCEP might just be the answer.

Understanding RCEP and Bangladesh’s Strategic Interests

RCEP connects several regional economies of the Asia-Pacific. Its key commitments include the facilitation of trade of goods, services, investments, and economic cooperation. In this respect, RCEP endeavors for economic growth to be achieved through reductions in tariff and trade barriers with the simplification of regulatory regimes for the promotion of greater economic cooperation among member states that also include major economies such as China, Japan, South Korea, and Australia.

Bangladesh is interested in joining RCEP because it is approaching graduation from LDC status. Afterwards, Bangladesh too will face the loss of non-reciprocal preferential trade with traditional markets like the EU and US. Accession to RCEP offers a strategic confluence of opportunities for the country to diversify both with newer and emerging markets.

This may also be seen through the prism of a broader desire for regional economic integration — a reason that explains the country’s preoccupation with RCEP rather than bilateral agreements, such as the CEPA with India, which the previous regime had been keen on joining.

Reaching the markets of China, Japan, South Korea, and Australia is important to achieve the long-term goals of Bangladesh related to enhancing its exports, improving its economic growth, and ensuring the competitiveness of its manufacturing sector.

Potential Benefits for Bangladesh from Joining RCEP

Export Growth: The inclusion of Bangladesh in RCEP is likely to multiply its export manifold, particularly in textiles and apparel. Because of the RCEP tariff reduction arrangement, Bangladeshi goods will have better access to major markets like China, Japan, and South Korea.

Better access to such markets is likely to increase the country’s exports by more than 17%, thus enabling the country to make more export diversification beyond its traditional markets in Europe and the US. The removal of trade barriers will make Bangladeshi products more competitive in such high-demand markets, strengthening its export-driven economy.

FDI: The membership is likely to attract much larger volumes of FDI, especially from the regional colossuses. These countries are already big investors in Bangladesh’s infrastructure and manufacturing sectors. RCEP would make investment easier by reducing regulatory barriers in addition to fostering closer economic cooperation among its member states.

Increasing competitiveness: Through RCEP, Bangladesh will be able to acquire advanced technologies and supply chains. This would raise the country’s competitiveness in the international market. Access to more sophisticated production techniques and supply chains will provide opportunities for Bangladesh to increase productivity and decrease costs and, hence, improve the quality of exports.

Integration with Regional Value Chains: Under RCEP, Bangladesh sees an excellent opportunity to integrate deeper into the regional value and industrial chain. This integration will involve collaboration with ASEAN countries and Japan, South Korea, and Australia, which have all built advanced ecosystems in manufacturing and technologies.

Challenges Bangladesh May Face in Joining RCEP

Reforms in tariffs remain the most imposing issue. Bangladesh is expected to go through opposition from local industries, particularly textiles and garments, high-tariff ones that give lifeblood to the working economy of the country. Reduction of tariffs as required by RCEP will expose local businesses to greater competition emanating from more established exporters in the bloc. Balancing those reforms with protection for domestic industries calls for circumspect negotiation and strategy.

Regarding competitiveness vis-à-vis other member states, Bangladesh has to compete against countries like Vietnam that already enjoyed preferential duty-free access to major markets through the RCEP. This is a real challenge, as it enjoys competitive advantages in established trade relationships, particularly in the apparel sector. Bangladesh must strengthen its competitiveness without losing market shares to regional competitors.

Also, there is a need for Bangladesh to comply with the RCEP standard in trade, services, and investment. This will require far-reaching legal and regulatory reforms commensurate with the commitments of the agreement. Coverage of trade facilitation mechanisms, upliftment in transparency, and alignment to bloc. These regulatory frameworks will be quite an expensive process.

Lastly, political and diplomatic considerations would also be critical. Not having India on board, RCEP would put a burden on Bangladesh’s bilateral relations based on its move to join this union. Bangladesh will have to balance diplomatic relations with both China as one of its prime drivers among the RCEP membership and India. The geopolitical environment will, therefore, become a determining factor in Bangladesh’s future alignment with RCEP.

Joining RCEP provides Bangladesh with excellent opportunities to facilitate more significant exports, FDI inflow, and integration into regional value chains. Admittedly, challenges loom over tariff reforms and the rising tide of competition; with proper planning and timely reform packages, Bangladesh would be able to overcome those challenges. In the long term, the judicious use of RCEP membership would ensure economic growth and competitiveness for Bangladesh in the global economy.

AUTHOR,

Naziba Mustabshira is a third-year student in International Relations at the Bangladesh University of Professionals (BUP). She is passionate about blending research with creative writing to spark academic discussions on global affairs, with a particular interest in geopolitics and foreign policy. Naziba has experience leading literary events and has contributed to multiple academic and creative writing projects.