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Increasing the Market Access for Agricultural Products from Bangladesh to the Eu

Jorge Nufiez Ferrer
Associate Research Fellow
Centre for European Policy Studies, University of Leuven, Belgium

Anisatul Fatema Yousuf
Assistant Editor and Head (Dialogue & Communication)
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Debapriya Bhattacharya
Series Editor and Executive Director
Centre for Policy Dialogue (CPD), House No 40/C, Road No 11 (new), Dhanmondi R/A, Dhaka-1209 Bangladesh

Abstract/ Executive Summary:

This paper analyses the present developments and future prospects for increased agricultural trade for Bangladesh with the EU. The trade relationship with the European Union (EU) is seeing important changes in recent years. The EU has unilaterally eliminated in 2001 tariff barriers for products originating in Less Developed Countries through the Everything But Arms (EBA) agreement, which includes the highly protected agricultural products. This creates important export opportunities for Bangladesh. The paper analyses in detail the export trends for major agricultural products from Bangladesh and other countries in the region to look for any evidence of an impact from the EBA. Despite the short period analyzed, there are indications of some positive impacts. However, these are often rather weak and at times there are none where expected. Analyzing the trends of regional competitors, the paper implies that even with EBA Bangladesh lacks price competitiveness in some products, and most importantly a lack of marketing strategy directed towards EU consumers. For the future, the impact of the EBA will also depend on a number of other factors, such as any progress in the farm liberalization negotiations at WTO, amendments in the Sanitary and Phytosanitary rules and the reform of the EU’s Common Agricultural Policy. All of these factors have the potential to erode the benefits of the EBA considerably. The paper also addresses some important strategic aspects to improve import opportunities, from marketing to taking advantage of the trade related assistance offered by the EU to the less developed countries.

Keywords: EU-EBA, Agreement, Tariff barriers, LDCs, Trade-related assistance, TRA, Common Agricultural Policy, CAP, WTO Non-tariff barriers

Location: In Bangladesh

Start Date: 00-00-2002

End Date: 00-00-2005

Program Area: Socio-economic and Policy

Commodity: Market analysis, Management, Sustainable livelihood

Objectives:

This paper has the objective to analyze four important aspects that will dominate the trade relationship between Bangladesh and the EU for agricultural products in the future: (a). the EU-EBA (Everything But Arms) agreement, which abolishes all EU tariff barriers for all imports from the LDCs from 2001 onwards (with the exception of a delayed application for three sensitive products) and expresses a commitment to enhancing trade-related assistance (TRA); (b). the implications for the trade of the latest reform of the Common Agricultural Policy (CAP); (c). the implications of the agreement on the modalities for the WTO Doha round of negotiations (the “July Package”, agreed on 1 August 2004); (d). the implications of the non-tariff barriers created by the SPS (sanitary and phytosanitary agreement of the WTO) measures and rules of origin requirements.

Methodology:

The EU-EBA agreement has been introduced into the EU Generalised System of Preferences (GSP) in 2001. The GSP agreement came into force in 1971, because trade discrimination practices were not allowed under the GATT (General Agreement on Tariffs and Trade), a waiver was introduced for developing countries (the so-called "enabling clause") creating the legal framework for the Generalised System of Tariff Preferences. Under this framework, developed countries are authorized to establish individual "Generalised Schemes of Tariff Preferences". The countries covered by the EU-GSP include all developing countries and the EU member states. The present format of the policy originated in 1998. The main objective of this agreement is to grant special trade preferences to developing countries in order to foster development and help them to compete on international markets (EU Commission, 2001). The agreement has been renewed every three years. The EU Council Regulation (EC) No 2501/2001 (annexed to this document) contains the legal provisions for the GSP scheme, which is applicable for the period from 1 January 2002 to 31 December 2005. However, the EBA regulation foresees that the special arrangements for LDCs should be maintained for an unlimited period of time and will not be subject to the periodic renewal of the EU scheme of generalized preferences. Therefore, the date of expiry of European Council Regulation (EC) No 2501/2001 does not apply to its EBA provisions. This section will only concentrate on those issues which are relevant to the EBA agreement. the scheme, which is applicable for the period from 1 January 2002 to 31 December 2005. However, the EBA regulation foresees that the special arrangements for LDCs should be maintained for an unlimited period of time and will not be subject to the periodic renewal of the EU scheme of generalized preferences. Therefore, the date of expiry of European Council Regulation (EC) No 2501/2001 does not apply to its EBA provisions. This section will only concentrate on those issues which are relevant to the EBA agreement. Under the HS 07 Heading, Bangladesh has seen a substantial increase in exports of vegetables between 2002 and 2003. Vietnam shows an increase too but so does India. From this graphical result alone, it is difficult to infer whether the increase is due to Bangladesh starting to take advantage of the EBA facilities or not. However, the magnitude of the increase has not been matched in any of the other countries researched. In 2003 Bangladesh has increased its exports by 40 percent in volume compared to the previous year. It is interesting to note that Bangladesh only started exporting garlic to the EU in 2002, probably as a response to the EBA. In terms of cif price, Bangladesh is competitive with China and Thailand (which interestingly stopped exporting to the EU in 2001). India, however, is still competitive even after tariffs (in-quota). After a bad year in 2002, India has partially recovered its import share in 2003, which corresponds with a big fall in the cif price. On tariff reductions, the modalities of the Doha Round of WTO negotiations are very vague. There are no clear commitments of the method to reduce tariff barriers. The authors of these studies have assumed that two possible options are the most likely. One is based on the WTO Harbison proposal (tariff cuts proportional to size of tariff) and the other is based on the Swiss formula, which was an approach proposed by Switzerland on the course of the negotiations, proposing a maximum tariff of 25 percent and then reductions proportional to size below this level. One of the impacts of the regulation is that further streamlining of production will be required, with a serious sectoral restructuring. The most damaging effect of these rules is that small farmer selling their produce to processors are likely to see their produce rejected. Only larger commercial operators will be able to record their input methods and input suppliers. One of the impacts of the regulation is that further streamlining of production will be required, with a serious sectoral restructuring. The most damaging effect of these rules is that small farmer selling their produce to processors are likely to see their produce rejected. Only larger commercial operators will be able to record their input methods and input suppliers.

Source of Information: CPD Occasional Paper Series 58. ISSN 1818-1570 (Print)

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Achievement/Findings:

Bangladesh has started reaping some benefits from the EBA in the agricultural sector, but the benefits have been slow to materialize and the markets are not guaranteed. Agricultural exports concentrate heavily on a few primary products and the analysis performed indicates that these are subject to fierce competition from neighbouring countries. There is a lack of value-added, making the proportional relationship between value and quantity of exports less favourable for Bangladesh. The reforms of the Common Agricultural Policy of the European Union will improve some market access for Bangladesh, in particular for its rice production. In the longer term, however, some of the benefits will be reduced, lost or be at risk following sugar reforms and the developments at the Doha WTO round of trade liberalisation. A WTO reform, however, can open new opportunities. If export subsidies are abolished, the EU will lose its competitive edge in various markets, and Bangladesh should study possibilities to take over these markets, in particular for rice, e.g. in the Mediterranean region or Switzerland. The trade liberalisation process is accompanied by an increasingly restrictive set of SPS and rules of origin requirements, which can severely damage the export market to the EU. The latest traceability rules proposals of the EU could cause major damage to LDCs including Bangladesh.

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