BANGLADESH TRADE RELATION WITH EUROPEAN UNION

INTRODUCTIONThe EU: The European Union represents 6% of the worlds population. But it accounts for more than 20% of global imports and exports. The EU emerges as the leading trade power in the world today. As such, it exhibits a strong interest in creating conditions in which trade can prosper. The European Union is specially committed to supporting developing countries' efforts to integrate into the trading system and to help them reap the benefits of market opening, giving them a hand where needed (Europa, 2004). The European Union applies this particularly trade policy to the poorest countries, for which the benefits of globalization remain elusive. Furthermore, the European Union aims at free but fair world trade. The EUs trade policy now covers a broader canvas, beyond trade liberalization. It is about updating and improving international rules and giving trade partner countries a wider coverage to ensure fair trade and harnessed globalization.Like the other LDCs, Bangladesh gets more trading benefit from the European Union. The EU works closely with Bangladesh in the framework of the EU-Bangladesh co-operation agreement since in 1976 (Rahman et al., 2000). This agreement provides broad scope for co-operation extending to trade and economic development, human rights, good governance, and the environment (European Commission, 2013). Enhanced market access to the EU and an improved trading environment, the EU has provided the Generalized System of Preference (GSP) for Bangladesh. As such Bangladesh always enjoyed the advantage of duty and generally quota free access to the EU market. Export sector of Bangladesh has undergone structural changes in the decade of 80 in the last century with a significant shift from jute-centered exports to readymade garments and knitwear (Rahman, 2004). The main items that Bangladesh exports to the EU are ready-made garments (90%), frozen food (6%) and others (4%) cover leather and leather goods, jute, pharmaceutical product, and tea (Haque, at al., 2008). RMG: ready-made garment industry has virtually thriven in the competitive advantage of a quota free access to the EU market (Rahman, 2011). Moreover, the ECs autonomous decision to grant duty and quota free access to all products produced in the less developed countries (with the exception of arms) comes up with new perspectives for Bangladesh (World Bank, 2002). The main imports from the EU consist of transport equipment, textile and textile articles, food stuffs, beverages and tobacco, machinery and appliances, and chemical products (European Commission, 2012). The balance of trade with EU, over the years, remained hugely in favor of Bangladesh (5572.06 million US dollars in 2010) (Statistical Year Book, 2011; Direction of Trade Statistics, 2011). Bangladesh enjoyed positive balance of trade from the year 1991and this trend is still to exist in the recent years. In 2006, Bangladesh's export to the EU member-states was in the tune of Euro 4.37 billion which comprised more 56 percent of its total exports to the world. Import

Relation of Bangladesh & EUAccording to the EU Trade Commission Report, Total legal imports have generally grown at a lesser pace than Bangladeshs exports over the last decadeimports come to a large extent from Asia and therefore, the country has enjoyed a growing trade surplus with the EU. In recent years, Bangladesh has re-oriented its trade policy towards a higher degree of openness, and various reforms have been started, including reduction of tariffs, removal of quantitative restrictions (quota) and simplification of import procedures (e.g. import licensing, certificates). Bangladeshs exports towards the EU are intimately linked to the Communitys Generalized System of Preferences (GSP) scheme. Bangladesh, as a member of the LDC, retains under the GSP scheme holding the total suspension of import duties and quotas on eligible products originating from Bangladesh. The Everything But Arms (EBA) initiative approved by the EU in 2001 further opens the EU market to Bangladesh by granting duty-free access to essentially all products from the least developed countries. As a SAARC nation, Bangladesh also enjoys the benefit of regional accumulation of the Rules of Origin. Industrial configuration in Bangladesh are found to be vulnerable in embracing the sensitive provisions of the above accompanying the decisive issue of market access specifically towards the European Union.There are 28 countries in EU. And Bangladesh has trade relation with most of these countries. Among them Germany, U.K., France and Spain has strong trade relation with Bangladesh. So we will describe these four countries with Bangladesh. Bangladesh Trade Relation with EU overall The European Communitys assistance to Bangladesh began as early as 1976. However, this initial assistance was predominantly in the form of food aid. During the 1980s the assistance was expanded to cover irrigation, rural settlements and development projects. The advent of the nineties marked considerable changes in the EU strategy in Bangladesh in terms of specific objectives, size and emphasis.As a result of 1994 EC strategy towards Asia, Bangladesh became a potential beneficiary of a number of regional ASIA programs. The general objective of these programs was essentially promotion of an enhanced economic presence of EU in Asia. However, the programs failed to gain foothold in Bangladesh since they were not geared to meet the typical deficiencies of a least developed country.Fortunately at the trade front of economic cooperation between EU and Bangladesh there has been a positive balance throughout. EU has always included Bangladesh in its Generalized System of Preferences. As such Bangladesh always enjoyed the advantage of duty and generally quota-free access to the EU market. The largest industry of Bangladesh, namely, the Readymade Garment industry has virtually thriven in the competitive advantage of a quota free access to the EU market, while, the countrys shrimp industry complying with the EC sanitary standards has secured its EU market share by enjoying duty free access to the EU market. Moreover, the ECs autonomous decision to grant duty and quota free access to all products produced in the less developed countries (with the exception of arms) comes up with new perspectives for Bangladesh.Growth as well as sustainable economic and social development of the economy of Bangladesh requires a full and lasting integration of the economy into the world economy. In this context, EUs trade policy may be important in contributing towards the sustainable development of the country. However, just an enhanced market access and an improved trading environment in itself are not sufficient. The country must also be equipped with a capable government, proper and adequate infrastructure and human resource to be able to reap the benefits from the opportunities that it is offered. Therefore, the EU in its trade and economic cooperation with Bangladesh is all set to address the countrys supply-side constraints and competitiveness, trade-related areas, trade development measures, capacity building of public authorities, technology transfers, access to information and global networks and strategies to promote investment and private sector development. In the past years the EU implemented certain interventions in the area of trade promotion in Bangladesh. However, in recent years the focus of EU cooperation has been on several regional programs.A major feature of the export structure of Bangladesh is the dominance of the Readymade Garment (70% of total exports), which is primarily dependent on imported raw materials available through a preferential trade regime in EU quota-free and duty free access. However, exports from Bangladesh are likely to face a massive challenge after 2004, since by that time its competitors might successfully reduce Bangladeshs share of present market in the EU and the USA- its two very important export destinations (about 90%) of its exports of readymade garments. The effect of this will be detrimental to the economy as a whole, unless otherwise, Bangladesh adopts appropriate measures to meet this challenge. These measures may include diversifying its exports as also improving its existing capacity in terms of better marketing products. As mentioned earlier, EUs latest facility- Everything but Arms comes with an excellent opportunity for Bangladesh for diversifying its exports, particularly, in areas of agricultural products and agro-based industries.EU has resolved to cooperate with Bangladesh in these areas and hence enable it to diversify exports as also to promote its existing export items through improved market facilities. The EU interventions may include activities like training and other related technology transfer activities, especially in fields of economic-labelling, packaging, quality control, standards, market studies and other actions, which aim at exposing the local entrepreneurs to the severe challenge of accessing the EU market.

Bangladesh exported product to EU marketAccording to April-June, 2014 Bangladesh has exported 260189 million tk to EU market and it is 56.4% export of the total export over the world. The basic products that Bangladesh export to EU market includes, - Readymade garments- Fish, Shrimps and prawns- Jute Manufactures- Raw Jute- Leather and Leather Manufactures- Others (Tea, Frozen food, Chemical products)

Bangladesh Export to Different Countries in EU

Germany In the world the second largest buyer of Bangladeshi goods was Germany amounted to Tk. 25105.0 crore (15.8%) during the year under review as compared to Tk. 25095.8 crore (16.4%) and Tk. 19455.7 crore (15.6%) during 2011-2012 and 2010-2011 respectively. The major items of export to Germany were: readymade garments (Tk. 23042.0 crore), fish, shrimps & prawns (Tk. 365.0 crore), jute manufactures (Tk. 54.0 crore), leather & leather manufactures (Tk. 505.0 crore), raw jute (Tk. 16.0 crore) and handicrafts (Tk. 6.0 crore).

Country/commodities 2012-20132011-20122010-2011changes(1-2)changes(1-3)

12345

Germany2510525095.819455.79.25649.3

15.816.415.6

1.Readymade garments2304222965.617074.676.45967.4

2.Fish, Shrimps and prawns365359.5338.45.526.6

3.Jute Manufactures5420.213.533.840.5

4.Raw Jute505359.8260145.2245

5.Leather and leather manufactures1612.618.73.4-2.7

6.Handicrafts67.24.9-1.21.1

7.Others11171370.91745.6-253.9-628.6

Table 1

United Kingdom (U.K)The next important trading partner was the U.K. Export earnings from U.K. amounted to Tk. 16235.0 crore (10.2%) during the year 2012-2013 as compared to Tk. 15800.8 crore (10.3%) and Tk. 11395.2 crore (9.1%) in the previous year 2011-2012 and 2010-2011 respectively. The main items of exports to the U.K. were readymade garments (Tk. 14338.0 crore), fish, shrimps & prawns (Tk.650.0 crore), jute manufactures (Tk. 34.0 crore), leather & leather manufactures (Tk. 38.0 crore), raw jute (Tk. 14.0 crore) and handicraft (Tk. 6.0).

Country/commodities 2012-20132011-20122010-2011changes(1-2)changes(1-3)

12345

United Kingdom (U.K)1623515800.811395.2434.24839.8

10.210.39.1

1.Readymade garments143389489.59489.54848.54848.5

2.Fish, Shrimps and prawns650805532-155118

3.Jute Manufactures3430.929.13.14.9

4.Raw Jute3839.440.6-1.4-2.6

5.Leather and leather manufactures1422.615.5-8.6-1.5

6.Handicrafts65.530.53

7.Others11555407.91285.5-4252.9-130.5

Table: 2

France & Spain France purchased goods worth Tk. 9862.0 crore (6.2%) during the year under review. The shares of Spain in export receipts during 2012-2013 and 2011-2012 were Tk. 7302.0 crore (4.6 %) and Tk. 7056.1 crore (4.6%) respectively.

Country/commodities 2012-20132011-20122010-2011changes(1-2)changes(1-3)

12345

France

986210172.19368.1-310.1493.9

6.2-6.6-7.5

1.Readymade garments901394048367.1-391645.9

2.Fish, Shrimps and prawns162157.8125.34.236.7

3.Jute Manufactures614.16.7-8.1-0.7

4.Raw Jute147156.698.2-9.648.8

5.Leather and leather manufactures0.31.51-1.2-0.7

6.Handicrafts10011

7.Others532.7438.1769.894.6-237.1

Table: 3Country/commodities 2012-20132011-20122010-2011changes(1-2)changes(1-3)

12345

Spain

73027056.14503.2245.92798.8

(4.6)(4.6)(3.6)

1.Readymade garments6961.006751.604175.70209.42785.3

2.Fish, Shrimps and prawns11.004.104.106.96.9

3.Jute Manufactures25.0027.1037.00-2.1-12.0

4.Raw Jute146.0013.90107.70132.138.3

5.Leather and leather manufactures2.0010.407.30-8.4-5.3

6.Handicrafts1.001.201.00-0.20.0

7.Others156.00247.80170.40-91.8-14.4

Table: 4

Bangladesh Export to EU (Overall)Table-IV below shows a comparative position of Export Receipts by bloc/group/community during the quarters April-June, 2014, January-March, 2014 and April-June, 2013. In the quarter April-June,2014, it is revealed that EU member countries emerged as the largest buyers of Bangladeshi goods amounting to Tk.260189 million (or 56.4 %) during the period under review as compared to Tk.248917 million (or 54.6 %) during the previous quarter.April-June, 2014January-March, 2014April-June, 2013

TakaU.S. DollarPercentage of totalTakaU.S. DollarPercentage of totalTakaU.S. DollarPercentage of total

European Union 260189335156.4248917320254.6223581287052.6

(In million)

Bangladesh Import from EUImport product list- Nuclear reactor, boilers, machinery and mechanical appliances; parts there of Electrical machinery and equipment and parts Ships, boats and floating structures Optical, photographic, cinematographic, measuring, checking, precision, medical or surgical instruments and apparatus, parts Miscellaneous chemical products Plastics and articles thereof Soap, organic surface-active agents, washing preparations, lubricating preparations Pharmaceutical products Vehicles other than railway or tramway rolling-stock, and parts and accessories thereof Fertilizer Man- made staple fibers Cotton (all types), cotton yarn / thread and cotton fabrics

Bangladesh Import from Different Countries in EU

CountryApril-June, 2014January-March, 2014April-June, 2013

TakaU.S. DollarTakaU.S. DollarTakaU.S. Dollar

Germany14077181.38972115.410448134.1

United Kingdom (U.K)724993.4592276.2658284.5

France309939.9198525.5487162.6

Spain213827.5178723.0292637.6

In million

Bangladesh Import from EU (Overall Import)

CommunityApril-June, 2014January-March, 2014

Amount% of TotalAmount% of Total

TakaUSDTakaUSD

European Union 47774615.36.444867577.16.1

Source: Statistics Department, Bangladesh Bank.

Bangladesh Total Export, Import and Balance

Balance of Trade with EU

Balance of Payment with EU

Industry Wise Market Barriers to Export the EU MarketBangladesh export 56.4% of her total exported goods to the EU market. Export sectors being the major revenue generating sectors for a developing economy like Bangladesh; industry for leather and leather goods, knitwear, pharmaceuticals and the shrimp processing industry had considered to be the lead earning sectors. -Leather and Leather Goods Export-Knitwear Export-Shrimp Export-Pharmaceutical product export

RecommendationsThe EU is an important development partner of Bangladesh and there has been a longstanding friendship and partnership between the EU and Bangladesh. Instead of this, the EU is a major trading partner of Bangladesh. More than half of Bangladeshs total exports go to the market of the EU. For enhancement of trade between Bangladesh and the EU, exportable goods from Bangladesh to the EU should be well design, diversified, and price competitive with improved quality. Bangladesh should also improve compliance facilities, ensure political stability, improve utilities and port facilities, On the contrary, the EU should provide technical support and arrange training for the workers, owners, and exporter, provide long term GSP facilities and more quota free access to the EU market. Under the trade liberalization or free trade regime, Bangladesh and the EU gains more benefits when they are trading with each other. Real exchange rate is the influential factor of exports and imports. In order to get more benefits from trade, Bangladesh and the EU should keep the real exchange rate lower. Bangladesh should concentrate and raise the specific priorities in producing the products which have the potential specialization. In order to maintain sustainable export growth in the future, Bangladesh should formulate relevant policies clearly to advocate the potential labor intensive specific products like ready-made garments, lather products, tea, handicrafts, and jute. To protect bio-diversity and maintain ecological balance, Bangladesh should stop export of frozen food. Similarly, upgrade the environmental condition and establish a low carbon society, Bangladesh should imports well fitted, cost effective, and environmental friendly imports goods.

https://www.gov.uk/government/publications/exporting-to-bangladesh