Recent news headlines have been dominated by China’s announcement to exempt tariffs on 97% of exports from Bangladesh. This significant step came into effect after Bangladesh approached China asking for an exemption for its export items due to the economic hardships brought about by the Covid-19 pandemic.
The Background and China’s Response
The impact of the ongoing pandemic prompted Bangladesh to request China’s assistance in the form of tariff exemptions. In response, China granted this request, considering Bangladesh’s status as one of the Least Developed Countries (LDCs). This move has been hailed as a major advancement in the bilateral relationship between China and Bangladesh.
The Benefits for Bangladesh
The tariff exemptions will serve as a strong catalyst for Bangladesh to recover from the economic fallout of the pandemic. Additionally, Bangladesh stands to possibly benefit from the trade war between the U.S. and China, alongside Vietnam and Chile. The void left in the supply chain due to the U.S.-China trade feud could potentially be filled by the increased export of tariff-exempt goods from Bangladesh. This step will also help Bangladesh shrink its trade deficit with China significantly.
The Implication of Tariff Exemptions
As a result of China’s recent decision, a total of 8256 goods from Bangladesh will be exempted from Chinese tariffs. Previous arrangements under the Asia Pacific Trade Agreement (APTA) only exempted 3095 items.
China’s Influence in India’s Neighbourhood
China’s escalating investment in countries surrounding India has expanded its dominance in the Indian Ocean. Traditional cultural and historical ties with India notwithstanding, neighbouring countries are increasingly aligning with China on diplomatic issues.
The Asia Pacific Trade Agreement Explained
The Asia Pacific Trade Agreement (APTA), formerly known as the Bangkok Agreement, is a preferential tariff arrangement designed with the aim of enhancing intra-regional trade through agreed concessions by member countries. The current members include Bangladesh, China, India, Republic of Korea, Lao PDR, and Sri Lanka.
About Least Developed Countries
Least Developed Countries (LDCs) as designated by the United Nations are low-income countries grappling with numerous structural barriers to sustainable development. These nations are highly susceptible to economic and environmental shocks and have low levels of human assets.
India-China Rivalry and Its Impact on Bangladesh
Bangladesh has significantly benefited from the India-China rivalry, using this tension as leverage to boost its security and attract investment. In 2015, China outpaced India to become Bangladesh’s top trading partner, a position that India had held for four decades.
The Strained Relationship between India and Bangladesh
India’s high-handed tactics and dominant stance have created resentment among the public in Bangladesh. This discontent is further magnified when contrasted with China’s non-interference policy in domestic affairs coupled with its generous spending.
What Lies Ahead
For the betterment of both nations, India should continue fostering its partnership with Bangladesh to facilitate improved developmental parameters and economic growth. Ensuring a good relationship with neighbouring countries is essential for India to compete with China’s growing influence in the region.
