Perks For Early Trade Deal

Perks is must for early trade deal, Seasonal woes a partner should not feel.

Bangladesh and the USA is on the verge of finalizing a bilateral trade agreement. Both sides are scheduled to hold talks on Jul 3 and 4 to decide the nitty-gritty of the agreement. Bangladesh decided to import wheat from the USA this year,costing the govt $25 more per tonne than the international market price. It is in line with govt's attempt to downsize more than $6 billion trade surplus in favor of Bangladesh.

Govt earlier removed VAT/duties from LNG,soybean, animal feed--- which mostly come from the USA--- in the next budget. This will increase the pace of importing US goods. Scrap metal,cotton,plane engines are other major importing items for Bangladesh. Bangladesh also decided to import more US passenger aircraft and engines. Cotton is also likely to see boost in import.

There is widespread speculation that the Trump administration may pause the process of reciprocal tariff for another 1 year.

There should be perks for countries for concluding talks earlier. Otherwise, Bangladesh should wait and see what other countries offer on the table if the pause is indeed [prolonged].

I think both countries should also include special treatment of factors of production (i.e. capital, labor). The US citizens (black/white) can take up jobs in specialized sectors like financial market, port management, power management, tertiary education, automobile manufacturing etc. And Bangladeshi workers can work and set up business in the USA. Similarly, Bangladeshi businesses need foreign credit. Only few businesses have access to MIGA,IFC and other multilateral funding arrangements. If the US financial institutions like Citibank and other investment banks ,state funds provide special credit to Bangladeshi private sectors aiming to boost manufacturing in both the countries, it will augment the scope of foreign financing for Bangladeshi private sector. At the same time, setting up DEA office and congress office here will keep at bay any vested quarter who may take advantage of this kind of trade and investment privileges as happened in Mexico.

Recently, crude oil price crossing $70/barrel caused lots of concerns at home. Luckily, it came down to $65/barrel. High oil prices (above $70/ barrel) have pros and cons for Bangladesh economy. High oil prices deteriorated current account balance , yet below $70/barrel prices did not always result in [current account] surplus in the past, as I explained in one of my pieces back in 2019. (See "Oil Price & Current Account Balance" ,published here on March 22,2020)

Oil prices above a threshold level ($70/barrel) allows the Saudi government to expand its social security programs, which in turn permit Saudi households to recruit foreign domestic help,agricultural workers. Consequently, this policy helps to recruit more Bangladeshi workers and [bring] more remittances at home to pop up the current account balance. Apart from that it brings new investment money for the Middle East to resume planned infrastructure projects ,resulting in recruiting more foreign workers. High energy subsidies due to high oil prices whether outweigh the extra remittances should be the cause of concerns.

Luckily govt adjusts fuel prices every month and the market price largely reflects [the original] fuel prices, reducing govt's subsidy burden greatly.

Oil price drop is a good news for the govt as it does not have to increase the energy subsidies.

If we somehow add special energy deal,investment in biofuel production in Bangladesh or biofuel import from the USA in trade negotiation, it will reduce greatly our energy woes from seasonal shock.

In brief, early bilateral trade deal should have perks. Bilateral trade agreement should also focus on setting up dedicated DEA office in Dhaka, quality testing centers, US public representatives' office, strengthening international humanitarian offices through setting up forensic lab so that evil quarters do not take advantage of it or exploit the loopholes. At the same time, such deal should address the investment and energy woes of Bangladesh.