The Regional Comprehensive Economic Partnership or RCEP is currently the largest trade agreement in the world. A trade agreement is an agreement between two or more countries where the various products and services manufactured in the contracting countries may trade among themselves partially or at a totally free tariff. According to an ADB source, Bangladesh has a total of 14 free trade agreements, including APTA and SAFTA. In addition, Bangladesh has GSP status as a Least Developed Country under which Australia, New Zealand, Japan, Canada as well as 28 EU countries have the privilege of duty-free quota, free access to all types of products except arms and ammunition. However, after graduating from LDC in 2026, Bangladesh may lose all these benefits. In this case, under RCEP, Bangladesh will be able to enjoy the benefits of low trade tariffs, open trade, and attracting foreign investment. In this context, Bangladesh has recently decided to join this agreement.
Overview of RCEP
The idea of RCEP was first introduced at the 19th Association of Southeast Asian Nations or ASEAN Summit in November 2011. Through the RCEP agreement, more than 90 percent of merchandise trade between member countries will become zero-tariff. Under RCEP, various non-tariff barriers such as subsidies, customs delays, and technical barriers will also be reduced. In addition, the various products and services produced in the member countries will be actively cross-border trade among themselves. As a result, local manufacturers will focus more on maintaining the quality of their products as well as attracting global traders and foreign investors.
The following year, negotiations began regarding RCEP with a total of 18 countries, including 10 ASEAN countries, as well as China, Japan, India, South Korea, Australia and New Zealand. As a key member of the RCEP, China has made significant contributions to shaping Asia-Pacific trade policy. In 2012, Beijing began pushing further the RCEP agreement to counter the US-led Free Trade Agreement (TPP) or Trans-Pacific Partnership. As a result, China was excluded from the TPP agreement; However, in 2016, then-President Donald Trump removed the USA from the TPP agreement. Since then, the RCEP has become China’s main tool for competing with the USA, and this agreement has given new impetus to the US-China trade war. According to The Daily Star, the total trade value of RCEP members in 2018 was about 2.8 trillion, of which 57% was intra-RCEP trade.
On November 4, 2019, India withdrew from the agreement due to various economic and geopolitical issues. According to a Business Standard source, India was apprehensive about RCEP from the beginning. Because, if included in this agreement, Indian industries may fail to compete with China, and due to the open market, Chinese products will spread widely in the Indian market. Which will have a negative impact on local traders in India. In this context, on November 15, 2020, the remaining 15 countries, except India, signed the RCEP Agreement. However, without India, RCEP has become the largest trade agreement in the world, leaving behind EU, CPTPP (Formerly TPP) and US-MCA (Formerly NAFTA). According to The Daily Star, the 15 countries in the RCEP have a combined population of about 2.3 billion, about one-third of the world’s population. In addition, the combined GDP of the countries is about 24.8 trillion dollars (in purchasing power parity), which is about 29 percent of the global GDP. According to Brookings, by 2030, the agreement will increase the trading bloc’s GDP by 0.4 percent, which is about 170 billion.
Benefits of Bangladesh Joining RCEP
In the last decade, Bangladesh has grown a lot economically. By 2026, Bangladesh will be transformed from a Least Developed Country to a Developing Country. But as a result, Bangladesh will lose a number of other trade agreements, including benefits from GSP, which will affect the country’s overall growth and will lose competitiveness with other Asian countries. As a result, before graduating from LDC, Bangladesh will need to sign trade agreements like RCEP with bilateral trade with different countries. Currently, most of the Asian economic giants have joined the deal and it is expected that these growing economies of Asia will dominate the global market in the next decade. Therefore, joining a trade agreement like RCEP will be very fruitful for Bangladesh.
Multiple FTAs Under One
Bangladesh also needs to join the RCEP agreement if it does not want to lose market share to competitors. Or, go to the FTA or Foreign Trade Agreement separately with the RCEP member countries. In this case, the negotiation process will be quite a time-consuming and complicated enough to go to FTA with different countries. Furthermore, there is a high possibility that individual deals with each country will fail. On the other hand, by joining the RCEP agreement, Bangladesh will be able to trade under a unified system where Bangladesh will have access to many big markets at the same time.
Competitive Advantage in Apparel
As the largest competitor in Bangladesh’s RMG exports, Vietnam has joined the RCEP agreement and will have duty-free access to member countries. According to Commerce Ministry officials, Bangladesh could lose market share to Vietnam if it does not join the agreement. On the other hand, by joining the RCEP agreement, Bangladesh will be able to gain a competitive advantage in the RMG export market, especially in giant apparel markets like Japan and China.
Access to the World’s Biggest E-commerce
According to The Diplomat, the value of the e-commerce industry in Bangladesh is expected to reach around 3 billion by 2024. By joining the RCEP agreement, Bangladesh will have duty-free access to the world’s largest e-commerce marketplace in Southeast Asia. Which will play an important role in the growth of the country’s e-commerce industry. In addition, the agreement will make the supply chain for e-commerce relatively stronger as Bangladesh will be able to source the product at a lower cost than the other member countries. Moreover, production can be ensured at a lower cost for Bangladeshi entrepreneurs, and the product price will be more affordable for consumers as well.
Foreign Direct Investment
Bangladesh is still failing to collect an adequate amount of FDI. According to The Business Standard, while Bangladesh’s annual FDI should be around 3 to 4 percent of GDP, the country’s FDI inflow rate is only around 1 percent, the lowest in Asia.
Since, many world’s top investor countries are RCEP member countries; Bangladesh will be able to create a strong positions as they would be able to attract Foreign Direct Investment (FDI) from member countries by joining the RCEP Agreement. Bangladesh’s RCEP membership will allow many foreign countries to manufacture products in this country and enjoy free trade with other RCEP countries. In this context, many new opportunities will be open for Bangladesh, and it can be transformed into a manufacturing hub as well. Moreover, the opportunity to relocate various industries from economy like China to Bangladesh will also be created.