The proposed Bangladesh-China Free Trade Agreement (FTA) has sparked significant debate among policymakers, economists, and business leaders. As Bangladesh seeks to strengthen its economic ties with China—its largest trading partner—the potential FTA could bring both opportunities and challenges for local industries.
This article explores the potential impacts of the Bangladesh-China FTA on domestic industries, analyzing sectors that may benefit and those that could face stiff competition. We also examine how Bangladesh can leverage this agreement for sustainable industrial growth.
Overview of Bangladesh-China Trade Relations
China is Bangladesh’s top import partner, supplying machinery, textiles, electronics, and raw materials. In 2023, bilateral trade exceeded $25 billion, with Bangladesh importing over $22 billion worth of goods from China while exporting only about $1 billion.
The trade imbalance is a major concern, and an FTA could either worsen or help mitigate this gap, depending on its structure.
Potential Benefits of the Bangladesh-China FTA for Local Industries
1. Boost to Export-Oriented Industries
Bangladesh’s ready-made garment (RMG) sector, which contributes over 84% of total exports, could benefit from reduced tariffs in the Chinese market. Currently, Bangladesh faces high tariffs (10-20%) on apparel exports to China, whereas competitors like Vietnam and Cambodia enjoy lower duties under their FTAs with China.
An FTA could:
- Increase apparel exports to China’s growing middle-class market.
- Encourage diversification into higher-value garments.
- Attract Chinese investment in textile manufacturing.
2. Cheaper Raw Materials & Industrial Inputs
Many Bangladeshi industries rely on Chinese imports for machinery, chemicals, and fabrics. An FTA could:
- Reduce production costs by lowering import duties on raw materials.
- Enhance competitiveness of local manufacturers.
- Support emerging sectors like pharmaceuticals, leather, and plastics.
3. Technology Transfer & Industrial Upgradation
Chinese firms may invest in Bangladesh’s manufacturing and infrastructure sectors, leading to:
- Improved production techniques in textiles, ceramics, and light engineering.
- Development of special economic zones (SEZs) with Chinese collaboration.
- Increased FDI in high-tech industries like electronics and renewable energy.
4. Strengthening the Pharmaceutical Sector
Bangladesh’s pharma industry has strong potential, supplying generic drugs globally. An FTA could:
- Facilitate API (Active Pharmaceutical Ingredient) imports from China at lower costs.
- Open new export opportunities in the Chinese market.
- Encourage joint ventures for drug manufacturing.
Challenges & Risks for Local Industries
1. Threat to Domestic Manufacturing
Many small and medium-sized enterprises (SMEs) may struggle to compete with cheaper Chinese goods. Sectors at risk include:
- Plastics & ceramics – Chinese products are often cheaper due to economies of scale.
- Electronics & home appliances – Local brands may lose market share.
- Steel & construction materials – Chinese imports could dominate.
2. Widening Trade Deficit
Without strong export incentives, Bangladesh’s trade deficit with China could grow. The FTA must ensure:
- Tariff concessions for Bangladeshi exports.
- Non-tariff barrier reductions (e.g., customs delays, strict standards).
- Support for local industries to meet Chinese demand.
3. Risk of Deindustrialization
If local firms cannot compete, Bangladesh may become over-reliant on Chinese imports, leading to:
- Job losses in vulnerable sectors.
- Decline in domestic industrial growth.
- Increased dependency on foreign supply chains.
4. Intellectual Property & Dumping Concerns
- Chinese firms may dominate key sectors, limiting local innovation.
- Dumping of subsidized goods could harm domestic producers.
Strategies to Maximize Benefits & Minimize Risks
To ensure the FTA benefits Bangladesh, the government and industries should adopt the following strategies:
1. Strengthening Export Competitiveness
- Invest in high-value industries (e.g., man-made fiber, technical textiles).
- Improve product quality & compliance to meet Chinese standards.
- Promote trade diplomacy to secure favorable terms.
2. Protecting Vulnerable Industries
- Implement safeguard measures (e.g., temporary tariffs on sensitive goods).
- Provide subsidies & incentives for SMEs to modernize.
- Encourage import substitution in critical sectors.
3. Enhancing Local Production Capacity
- Develop backward linkage industries (e.g., yarn, fabric, machinery).
- Upgrade infrastructure & logistics to reduce production costs.
- Foster innovation & R&D to compete with Chinese products.
4. Leveraging Chinese Investment Wisely
- Encourage joint ventures for technology transfer.
- Focus on SEZs to attract value-added manufacturing.
- Ensure labor and environmental standards are upheld.
Conclusion
The Bangladesh-China FTA presents both opportunities and risks for local industries. While it could boost exports, lower production costs, and attract investment, there are concerns about increased competition, trade deficits, and deindustrialization.
To maximize gains, Bangladesh must negotiate favorable terms, protect vulnerable sectors, and enhance industrial competitiveness. With the right policies, the FTA could be a stepping stone for Bangladesh’s economic transformation, helping it move beyond reliance on low-cost labor to higher-value manufacturing.