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Understanding the impact of free trade agreements on businesses in Bangladesh

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Bangladesh, often heralded as the 'textile tiger' due to its thriving garment industry, is witnessing an era of extraordinary economic growth. An expanding middle class, coupled with a dynamic young workforce, is propelling the country to a pivotal position in global trade. Bolstered by a robust manufacturing base and a strategic geographical locale, Bangladesh presents enticing prospects for local businesses keen on making their mark in international markets.

As Bangladeshi enterprises progressively shift their gaze towards global expansion, the need to grasp the complexities of international trade becomes paramount. Within this intricate web, the preferential trade agreement and its counterpart, the free trade agreements (FTAs) demand particular focus. In this blog, we unpack the meaning of such foreign trade contracts and decipher the impact of international trade on economic and business growth in Bangladesh.

Demystifying trade agreements

FTAs are essentially international treaties that negotiate preferential trading conditions among countries. In simpler terms, these pacts ensure the reduction, if not complete elimination, of trade barriers for specific products. Under the umbrella of free trade, goods and services can traverse international borders with reduced or zero tariffs.

The transformative role of international trade in Bangladesh's economic growth narrative is hard to overlook, with FTAs playing a pivotal part in this metamorphosis. They serve as strategic conduits, unveiling numerous paths for businesses to tread.

Bangladesh’s participation in key FTAs

Bangladesh is a signatory to several regional trade agreements that leave a lasting imprint on its economic trajectory and trade practices. These include the South Asian Free Trade Agreement (SAFTA) and the Asia Pacific Trade Agreement (APTA), both of which are targeted towards catalysing economic growth in Bangladesh through fair and free trade practices.

These FTAs aim to enhance cooperation among nations, striving to uplift the collective economic prosperity of all parties involved. They achieve this by fostering a more fluid and competitive business climate, particularly beneficial for businesses keen on overseas shipping.

Advantages of trade agreements for businesses

Gaining a comprehensive understanding and strategically leveraging the myriad advantages of trade agreements can significantly boost your business growth strategy, especially if your operations span beyond Bangladesh's shores.

1. Access to new markets and increased export opportunities

FTAs sculpt new avenues of opportunity for businesses based in Bangladesh, granting them unparalleled access to international markets. The textile industry, a cornerstone of Bangladesh's economy, exemplifies a sector that can significantly benefit from these agreements.

By harnessing the favourable conditions proffered by FTAs, textile enterprises can amplify their export efficiency. This surge in export opportunities doesn't merely augment overseas trade but also resonates through the country's economic framework. This affirms the critical role of FTAs in amplifying the influence of international trade in Bangladesh's evolving economic landscape.

2. Reduction or elimination of tariffs and non-tariff barriers

Tariffs and non-tariff barriers can pose formidable challenges to international trade. Yet, these can be diminished or entirely eliminated through trade agreements, leading to considerable cost savings for businesses.

For instance, under the SAFTA, businesses can enjoy up to a 30% reduction in tariffs for all traded goods, like textiles. Such significant tariff cuts carve out a cost-effective production landscape, boosting the competitiveness of Bangladesh's sizable textile industry on a global scale.

3. Fostering competitiveness and market diversification

FTAs serve as a springboard for businesses, permitting them to delve into a multitude of markets. This helps broaden their commercial horizon, which in turn, encourages business diversification and strengthens competitiveness. For instance, a small-scale Bangladeshi handicrafts company might find an untapped market for its unique products in European or American countries. Access to these markets through FTAs allows the company to cater to a diverse customer base, reducing its dependence on the domestic market.

Moreover, exposure to global best practices and international competition can lead to improved products and services, thereby enhancing the competitiveness of Bangladeshi businesses. The chance to venture into new territories and compete on a larger stage can be a game changer which catalyses growth and expansion – especially for small e-commerce businesses in Bangladesh looking to reach a global audience.

4. Increased foreign direct investment

FTAs act as catalysts for foreign direct investment (FDI), often resulting in a substantial boost to the economy through heightened capital inflow. FDI is more than just an injection of foreign capital; it brings along advancements in technology, improvements in human skills, job creation, and increased competition in the domestic market.

A surge in FDI encourages businesses in Bangladesh to refine their products or services, keep up with cutting-edge technologies, and strengthen their competitiveness on the global stage. For example, a significant FDI in the Bangladeshi telecom sector could lead to the introduction of new technologies, such as 5G, resulting in upgraded infrastructure and better services for consumers. It could also spur local businesses to develop or enhance their digital solutions to keep up with this new technology, further invigorating the industry.

5. Transfer of technology and knowledge sharing

FTAs serve as crucial conduits for technology transfer and knowledge exchange among nations. This mechanism enables countries with lesser technological prowess to gain access to advanced technologies that other countries have already developed.

For businesses in Bangladesh, this represents a golden opportunity to enhance their operations, augment productivity, and foster innovation. For instance, in the case of the automobile industry, the transfer of technology can lead to the introduction of more fuel-efficient and eco-friendly vehicles.

Similarly, knowledge sharing about improved manufacturing practices can lead to safer, more efficient work environments. Moreover, exposure to global best practices can also lead to improvements in corporate governance, business ethics, and corporate social responsibility (CSR) activities. In a rapidly evolving global marketplace, these aspects can provide a competitive edge and contribute significantly to the growth and success of businesses.

Bringing DHL Express into the equation

For any business in Bangladesh considering international trade, selecting a reliable logistics partner is crucial. This is where DHL Express comes into the picture. Our profound understanding of complex logistics operations, coupled with our expertise in international shipping, can help your business traverse the complexities of trade agreements, ensuring that you reap their full benefits.

FTAs hold immense potential to impact businesses in Bangladesh, ushering in increased market access, tariff reductions, enhanced competitiveness, increased FDI, and technology transfer. With a trusted partner like DHL Express at your side, navigating the terrain of international trade becomes a less daunting journey.

Sign up for a business account with DHL Express and start reaching out to a global audience.