Advantages of bilateral free trade agreement (BFTA)

Advantages of bilateral free trade agreement (BFTA)

Md. Joynal Abdin

The Financial Express on June 19, 2009

Currently the world economy is experiencing a very serious economic crisis. World’s leading economies are suffering badly and working hard to overcome this crisis. Governments around the world offered special rescue packages to help the entrepreneurs so that the economic recession may not destroy their industrial sectors. The government of Bangladesh has also taken a comprehensive package to tackle the possible effect of recession. But we must remember that day comes after night. This recession may create opportunities for the growing economies to have newer market access around the world.

Presently countries are to share mutual strengths and overcome mutual weaknesses through combined efforts. As a result, countries are coming closer through various trade agreements like regional free trade agreements, bilateral free trade agreement even through cross-regional free trade agreements. Geographical distance is not an issue to act as a barrier today. ITC facilitates one touch connection between two cross-regional business interests.

Signing bilateral free trade agreement is not only creating the condition for closer relations among the nations but also providing a common platform to act in a united fashion in other multilateral platforms like, multilateral trade negotiation in the World Trade Organisation (WTO) and even in the global political arena under the UN. On the other hand, executing bilateral free trade agreement is comparatively easier than the regional or multilateral ones.

It facilitates resource sharing and to have a unique voice in the other forums. For example, during 11-17 May, 2009, this writer participated in an international workshop on “South Asian Economic Integration: Ways, Tools and Methods” in the Orchard Hotel, Singapore jointly organized the Asian Development Bank (ADB) and the Federation of Indian Chambers of Commerce and Industry (FICCI). During dummy trade negotiation session he found that, the young trade negotiators of Sri Lanka and India are talking from a common ground. Each of them is supporting strongly the argument of the other.

It is because they are now closer to each other than any other South Asian States. They have a bilateral trade agreement in action and they are going to further expand it into agreements on investment and labour movement very soon. So it is quite clear that they will act together in real trade negotiation table under the South Asian Free Trade Agreement (SAFTA) or in the WTO. As a result small Sri Lankan economy will get a strong support from giant India in these arenas.

The BFTAs also facilitate technology transfer and free flow of investment for the least developed countries (LDCs) like Bangladesh. These two are core elements of development of a country.

You may hardly get a single country except Bangladesh that is not having a bilateral free trade agreement with any neighbours. Not only neighbours, currently countries are signing cross-regional free trade agreements to ensure market access for their products abroad. This scribe may cite the example of the Singapore-USA free trade agreement here. Our neighbouring country India is also negotiating one bilateral free trade agreement with Singapore. Hopefully it may be concluded this year and will be executed from the next year.

Currently, Bangladesh has three proposals for signing bilateral free trade agreements. Those are Indo-Bangla FTA, Bangladesh-Sri Lanka FTA and Pak-Bangla FTA. It is not known why our government is in a state of indecision in connection with these BFTAs. From our past experience we can say that indecision is always harmful for us. For example, when submarine cable offer came, we neglected it or somehow avoided it. Similarly, the offer for the Asian Highway came. But we were dithering then and now it is depending on Indian and Thai decision, whether we may get connectivity with the Asian Highway. Usefulness of both the offers have been proved today and now we are ready to spend for the same.

Bangladesh’s experience regarding the regional trade agreements: Bangladesh is involved in four regional preferential trade agreements. Those are:

Asia Pacific Trade Agreement (APTA)

SAARC Preferential Trading Arrangement (SAPTA)

Trade Preferential System among the Countries of OIC (TPS-OIC)

Preferential Trading Arrangement among Developing-8 Countries (D-8 PTA)

We had one bilateral preferential trade agreement (PTA) with Islamic Republic of Iran i.e. “Preferential agreement Between Bangladesh and Iran”. We are a member of two Free Trade Agreements (FTAs). These are – South Asian Free Trade Area (SAFTA) and Bay of Bengal Initiatives for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC FTA)

None of the above is functioning well. So far as individual trade agreement is concerned, APTA is still in a negotiation stage, SAPTA has been transformed into SFTA, TPS-OIC and D-8 PTA would not be effective due to Turkey factor.

The only hope is AFTA, but until now intra-SAARC trade under SAFTA is less than 5.0 per cent and countries are not fulfilling SAFTA commitments as stated. A long negative list, some non-tariff barriers (NTBs), technical barriers to trade (TBTs) and geo-political factors are involved behind the ineffectiveness of SAFTA.

From the above discussion it is clear that, implementing RFTAs has involved a slow process and the progress may be halted by any country. On the other hand, implementing BFTA is quite easy and depends only on two signatory states. So we should give more concentration on BFTAs rather than waiting for multilateral or RFTAs.


Published by

Md. Joynal Abdin

Development Researcher, Columnist and Author

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