Bangladesh and Indonesia hope to sign a bilateral Preferential Trade Agreement (PTA) soon. In the year On January 28, 2018, the two countries established a Trade Negotiating Committee (TNC) and held three meetings, with the fourth scheduled to be held in Indonesia next month. The final discussion that should be the conclusion of the PTA negotiations can be held at the next meeting.
Preferential trade agreements are the simplest type of free trade agreement and involve a limited reduction or elimination of tariffs on certain goods between two or more countries. However, PTA negotiations often involve a delicate balance between protecting domestic industry and promoting trade. This happened during the PTA talks between Indonesia and Bangladesh, which was the first meeting of the Transitional Commission in December 2018.
In the year In the second meeting held in July 2019, Indonesia submitted a demand list of 309 products to Bangladesh requesting tariff reduction. Bangladesh also submitted a list of orders to Indonesia for 301 products, including apparel (garments and accessories), leather goods and leather goods, pharmaceuticals, jute and jute goods, and electronics.
Indonesia then proposed to sign the agreement at the 37th Indonesia Trade Fair, which will be held from October 19 to 23, 2022. Dhaka, however, has asked Jakarta to revise the list of items on which it can offer tariff concessions on Bangladeshi goods, including clothing. Delivered from Indonesia. Provisional list of goods on which tariffs are reduced. This is a pertinent question considering that Bangladesh is the world's second largest apparel exporter after China, with total exports expected to reach $35.8 billion by 2021.
However, the reduction of customs duties on Bangladeshi garments poses a dilemma for the Indonesian government. Jakarta is committed to promoting free trade in its pre-trade agreement, but it wants to protect some domestic industries, such as the garment industry, from competition, given the importance of the economy to cheap products.
Bangladeshi clothing seems to be very competitive in the Indonesian market. Indonesia's ready-to-wear garment imports from Bangladesh surged 194 percent in 2018. It has increased from US$25.6 million in 2013 to US$75.2 million in 2022, accounting for 68% of total apparel revenue. Although this increase is relatively high, it is 20-25%.
Indeed, Indonesia has a significant deficit in apparel trade with Bangladesh. It has dropped from $24.7 million in 2013 to $75.6 million in 2022. However, at the same time, Indonesia made profits from textile products (cotton, yarn and textiles). . Business. ) with Bangladesh went from $93.18 million to $335.46 million.
Tariff reduction on Bangladeshi garments can increase imports and achieve PTA's goal of increasing trade. On the other hand, lower tariffs may lead to a shift in trade from domestic and other domestic apparel producers. Cheap imports drive down prices, make it difficult for domestic producers to maintain profit margins and, in the worst cases, force them out of business.
Offering lower tariffs to Bangladesh could be seen as going against Indonesia's efforts to reduce garment imports from November 2021. The World Trade Organization (WTO) defines tariffs as an "emergency measure to protect domestic industries from increased imports." Any product that causes or is likely to cause serious injury at work. This is an additional cost, temporarily charged above the standard tariff, to support domestic industry as it adjusts to competition.
Based on the Harmonized System (HS), a product classification system to identify commercial goods, Indonesia is obliged to protect 134 types of clothing (according to HS 61 and 62). From 19,260 to IDR 63,000 per fruit for the first year and gradually decreases in the second and third year. Imports from 122 developing countries, including Bangladesh, are subject to tariffs, except for eight items of headwear and neckwear.
The period for the reduction of tariffs on Bangladeshi garments is after the expiry of the safeguard duty in 2024. However, under WTO rules, it can be extended beyond three years by reviewing the performance of the sector.
Another option is to allow concessionary tariffs under the PTA for Bangladeshi outfits, which will continue to issue protection orders until they expire. Further tariff concessions can be renegotiated on the revised PTA within an agreed time frame after implementation.
This choice demonstrates Indonesia's commitment to creating a mutually beneficial preferential trade environment with Bangladesh. Lower prices on clothing could be a win in Bangladesh, while in Indonesia it could bring huge profits to the textile trade.
The signing of the preliminary trade agreement will allow other Indonesian products such as palm oil, fish, spices, wood products, wood, electronics and railways to be more accessible to the Bangladeshi market. At the same time, the government needs to convince local stakeholders that it has no intention of sacrificing one aspect of the PTA for the benefit of another.
Regardless of the garment crisis, Indonesia and Bangladesh should continue to find ways to reach consensus and conclude a preferential trade agreement in the shortest possible time.
