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Duty-free market access to China: Bangladesh need to diversify products to increase apparel exports

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Despite having extended duty-free market access facilities to the Chinese market, Bangladesh’s apparel exports to the country declined by 32.72% to $163.30 million during the July-January period of the current fiscal year.

On June 16, 2020, the Chinese government announced the duty-free export facilities for 97% of its tariff line.

Bangladeshi-product-Chinese-Duty-free-market-access
Figure: On June 16, 2020, the Chinese government announced the duty-free export facilities for 97% of its tariff line.

With the announcement, a total of 8,256 Bangladeshi items are now eligible for zero duty facilities in the Chinese market effective from July last year.

According to Export Promotion Bureau (EPB) data, during July-January, the first seven months of the Fiscal Year 2020-21, Bangladesh earned $163.30 million, down by 32.72%, exporting clothing products to the Chinese markets. In the same period last year, Bangladesh earned $242.73 million.

As per the data, Knitwear products recorded a 22.76% negative growth to $77 million, which was $99 million in the same period of the previous year.

Woven products earned $87 million, down by 39.61%, which was $143.50 million a year ago.
However, the country’s total export earnings from China declined by 9.57% to $388 million during the July-January period of FY21, which was $429 million in the same period a year ago.

Major export goods to China include apparel goods, jute and jute products, rawhide and skins, plastic products, live and frozen fish and crabs.

Talking on the issue, industry people and economists blamed limited product baskets, while exporters are yet to get a clear notion about the items that are included in the duty-free market access list.

“It was expected that Bangladesh exports to China will see a rise with the effectiveness of new duty-free market access facilities but it did not happen as expected. This was because of the lack of a diversified product basket,” Khondaker Golam Moazzem, Research Director at the Centre for Policy Dialogue (CPD) told Textile Today.

“In addition, COVID-19 pandemic impacted the exports, which is another reason for the decline.”
To capitalize the duty-free market access, exporters have to be clear about the products included in the new list of tariff-free access to China, while the government has to provide the data on the prospects market opportunity, said the economist.

Based on the findings, exporters have to develop a wide range and diversified as well as value-added products. Customers’ demand and their fashion trend should be taken into consideration in developing products, said Moazzem.

Besides, a 40% value addition by Bangladesh to the product’s price is a barrier in cashing the opportunity. To reap the most benefits, the government has to negotiate with the Chinese government to liberalize value addition conditions, he added.

However, the exporters opined that Bangladesh could not cash the opportunity as the pandemic hit the exports when the duty-free market access came to effect.

“In the new list of duty-free market access, there are more items than that of the past and it is an opportunity for Bangladesh to grab more share in the Chinese market,” Abdus Salam Murshedy, Exporters Association of Bangladesh (EAB) president told Textile Today.

Since the COVID-19 pandemic hit the country’s exports and the supply chain was disrupted, we could not tap the opportunity. But we are hopeful to take the duty-free market access advantage with the return of normalcy in the economic activities, said Salam, also a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA).

On top of that, it would take time to be familiar with the new items and connect new buyers. By this year, Bangladesh will be able to take the advantage of the duty-free market access, he added.

Bangladesh also needs to attract Chinese investment in grabbing the market share as it would help to move toward value addition and to produce products beyond traditional ones.
We need to make products that the Chinese consumers want to buy and this new investment is crucial.

To this end, Chinese investment can help Bangladesh to a great extent, Dr. Zahid Hussain, former lead economist of the World Bank, Dhaka told Textile Today.

For example, we can attract more investment in manmade fiber and high valued products as the Chinese investors have experienced in these segments. If we can do it, it would help the local manufacturers to learn experience through knowledge sharing, said the economist.

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