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Challenges for our exports in post-graduation regime

Published : Sunday, 8 September, 2024 at 12:00 AM  Count : 341
Ferdaus Ara Begum
Bangladesh is getting ready for LDC Graduation and policies are revisited accordingly to accommodate new changes to be WTO-Compliant. In view of this, cash subsidies ranging 10-50% from 43 export products have been withdrawn in February 2024 and in the 2nd phase in June some cash support has been withdrawn. It seems that gradually cash supports for specific products will be withdrawn as per Subsidies and Countervailing Measures (SCM) agreement of WTO.

In the national budget for FY2023, government allocated cash incentives of Tk7,825 crore for the local exporters, except for those in the jute sector.Co-relation of export subsidy and export growth have not been calculated ever, and itbefell that a sectormay have been showing negative growth even after enjoying cash support for years together. Export diversification, encouraging new sectors in the new markets are the primary goals, but these cash supports have helped export diversification has not been proven yet.

Against this backdrop, Export Policy 2024-27, targeting export to reach USD 110 billion at the marginal year, announced different forms of assistances to be provided by different Ministries, organizations and agencies as a substitute of cash incentives.  These non-cash incentives have also hadmonetary value and if calculated will not be less than cash incentives, however it will not be meant for specific sector or products so may not be in the category of prohibited and specific subsidies as per WTO rules. 

Subsidies being provided by a government can distort trade flows that it can give artificial competitive advantage to exporters or import competing industries.   So, it might have an adverse impact on the interest of the trading partners as per WTO rules. Articles VI and XVI of GATT 1994 and SCMAgreement describes these issues in detail. There are three types subsidies such as; actionable subsidies meaning specific subsidies that cause adverse effects as per the agreement; non-actionable subsidies meaning nonspecific subsidies and prohibited subsidies (article 3), all are defined in the SCM.

Part I under general provision of the agreementdefined the subsidies as a financial contribution by a government or any public body within the territory of a member,  i.e. where  involves a direct transfer of funds, potential direct transfers of funds or liabilities,  government revenue that is otherwise due is foregone or not collected, goods or services other than general infrastructure, or purchases goods, payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the type of functions which would normally be vested in the government and the practice etc. Article II of the agreement describes the specificity of subsidies. 

Part II of the SCM described prohibited subsidy and Article 4 described the remedies started with a consultation as per request from a member and then finally to Dispute Settlement Body (DSB). Members can challenge prohibited subsidies through multilateral track or through countervail as a national track. Part III of the agreement (Article 5) refers to actionable subsidies if causes injuries to the domestic industries. This Article of course does not apply to subsidies maintained on agricultural products as provided in Article 13 of the Agreement on Agriculture. While Article 6 described serious prejudice and Article 7 on  the remedies in that respect.  

Non-actionable subsidies (Art 8) are those permitted as a general in nature applied across the board to all industries and not limited to a specific industry or enterprise or group of industries.  Meaning criterion should be neutral of industries, economic in nature and horizontal in application and no predominant use by a certain enterprise. 

The Agreement, in its annex -I illustrated list of export subsidies, there are  annexes explaining guidelines on consumption of inputs in the production process,  determination of substitution drawback systems as export subsidies, and calculation of total ad valorem subsidization (para 1(A) of Article-6), procedures for developing information concerning serious prejudice, assess procedures for on-the-spot investigations pursuant to paragraph 6 of Article 12.  

In this regard, a consultation  was started on March 14, 2018 following United States' challenge of alleged export subsidies provided by India under five sets of measures such as; the Export Oriented Units, Electronics Hardware Technology Park and Bio-Technology Park schemes; the Export Promotion Capital Goods scheme; the Special Economic Zones  scheme; a collection of duty stipulations described in these proceedings as the Duty-Free Imports for Exporters Scheme ; and the Merchandise Exports from India Scheme.However, on 18 July 2023, India and USA has mutually agreed for a solution and WTO circulated the notification, India withdraws it on November 19, 2019, negotiation of appeal in this dispute (WT/DS541/7).
 
Bangladesh so far as an LDC enjoyed all related benefits, S&DT treatments, however after graduation it needs to think differently aas a developing country. India on December 28, 2021, has announced its operational guidelines for production linked incentive (PLI) scheme for textiles for promoting Man Made Fibre andtechnical textiles segments. The scheme is in operation from 24.09.2021 to 31st March 2030 and the incentive under the scheme will be payable for a period of 5 years, the scheme described prescribedturnover and rate of incentive. Bangladesh needto dig details of similar examples of India and other countries to maintain its textile and RMG exports.

The SCM is very sensitive in maintaining international trade relations. Taking care of national interest and at the same time maintainingexport  growth at this stage of transformation, we need to craft our policies carefully so that a rational and balanced pathways can be  derived. 

The writer is Chief Executive Officer, Business Initiative Leading Development (BUILD)



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