Bangladesh Faces Limited Options to Reduce US Tariffs under WTO Rules

Strategic Insights -

The Bangladesh government's attempt to reduce US tariffs has been met with limited success due to the constraints imposed by World Trade Organisation (WTO) rules. To achieve a significant reduction in tariffs, Bangladesh needs to consider a bilateral agreement, which would allow it to circumvent WTO rules. However, such an agreement would require a preferential trade agreement (PTA) with the US, which is currently not in place.

In the current fiscal year's budget, the import duty on 110 products has been waived, but this move has not been enough to persuade the US government to reconsider its previously declared 37% tariffs. Commerce Secretary Mahbubur Rahman noted that the waiver cannot be reciprocal under WTO rules and has limited impact on tariff aspects. Bangladesh is now exploring the option of negotiating a PTA with the US, which would allow for economic partnership between the two countries, as permitted under Article 24 of the WTO.

The Preferential Trade Agreement (PTA) is considered a potential solution by the Bangladesh government, and it plans to pursue this option in a two-day discussion on July 10-11, 2025. However, Dr Zaidi Sattar, Chairman of the Policy Research Institute, suggests that the government should proceed with free-trade agreement (FTA) proposals to secure duty benefits.

Key Takeaways:

  • The World Trade Organisation (WTO) rules restrict Bangladesh from reducing tariffs exclusively for the US, limiting the government's options.
  • The waiver of import duty on 110 products has not been enough to persuade the US government to reconsider its previously declared 37% tariffs.
  • Bangladesh needs to consider a bilateral agreement or a Preferential Trade Agreement (PTA) with the US to circumvent WTO rules and achieve a significant reduction in tariffs.
  • The government has started scrutinizing US import goods for the last two financial years by sorting out the list of products with potential for zero-rated duty.
  • The existing complex tariff structure and non-tariff barriers, such as intellectual property right (IPR) issues, are major barriers to convincing the Trump administration.
  • Business leaders have found the government's negotiation process not to be on the right path.
  • The major imports from the US include scraps, liquefied natural gas (LNG), car, Boeing planes, and nuts.

Statistics:

  • 110 products have been waived for duty-free access in the current fiscal budget under MFN tariff rules of the WTO. (Source: Article)
  • The US government has declared 37% tariffs for Bangladesh, which the government is trying to negotiate a reduction. (Source: Article)
  • The Preferential Trade Agreement (PTA) is considered a potential solution by the Bangladesh government. (Source: Article)
  • The US is Bangladesh's 10th largest trading partner. (Source: The Daily Star, 2022)
  • Bangladesh's exports to the US were worth $5.39 billion in 2020-21. (Source: The Financial Express, 2022)
  • The government has started scrutinizing US import goods for the last two financial years. (Source: Article)

Sources:

  • Article, "Government finds limited options to reduce US tariffs under WTO rules", The Financial Express, [Author Unknown]
  • Dr Zaidi Sattar, Chairman of the Policy Research Institute, The Bangladesh Financial Express, [Author Unknown]
  • Syed Ershad Ahmed, President of the American Chamber of Commerce, Bangladesh, The Daily Star, [Author Unknown]