National Tariff Policy Opens Doors for Export Diversification

November 28, 2023

By  Zaidi Sattar

What have tariffs got to do with export diversification? That would be a fair question for a layperson to ask. The simple economic answer is ‘plenty’. This is an important revelation uniquely relevant to the Bangladesh context. Export diversification, that is, the rise in the share of various non-RMG exports in Bangladesh’s export basket, is not getting traction despite two decades of policy focus on ‘thrust sectors’, ‘high priority sectors’, and ‘special development sectors’. National Tariff Policy 2023 grabs the bull by the horns, as they say. The focus now turns to the state of tariff protection as the problem at hand.

Bangladesh badly needed a nationally recognised policy articulating the structure and trend of import tariffs. Now it has one in the National Tariff Policy (NTP) 2023 (Gazette notification of August 10, 2023). This is unique for a developing or developed economy. 75 years following the launch of the General Agreement on Tariffs and Trade (GATT), and its successor, WTO, tariffs around the world have been inexorably on the way down. So much so that average world tariffs are estimated at about 6%, low enough to turn attention to non-tariff barriers (NTBs) to trade and to trade facilitation measures to boost international trade. Trade policy analysts find current policies around the world being geared to removing what they call ‘trade friction’ through improved trade logistics and infrastructure. Across the Globe tariffs are no longer the centre of attention. Not so in Bangladesh.

Though Bangladesh liberalised trade significantly in the 1990s to be described as a ‘globaliser’, perhaps a second round of liberalisation of a different kind has become due. Thus the government felt it necessary to launch a National Tariff Policy 2023 (NTP 2023) in light of the impending graduation of Bangladesh out of Least Developed Country (LDC) status. Analysts in the past have identified a plethora of complexities, inconsistencies, and inherent conflicts within the tariff structure that make it antithetical to the national goals of a dynamic export-oriented and rapidly growing economy that Bangladesh is. The policy, as announced, will be operative for a period of five years, or until it is superseded by its successor policy sometime thereafter.

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Zaidi Sattar

Zaidi Sattar is Chairman, Policy Research Institute of Bangladesh (PRI). He did his PhD in Economics from Boston University, and taught economics at Boston University, University of Massachusetts, and Catholic University of America, before returning to Bangladesh. He is recognized as a leading expert on trade, tariffs and industrial policy issues in Bangladesh. As Team Leader or Co-Team Leader for several PRI studies for the Bangladesh Government he made substantial contribution in the preparation of the 6th (2011-2015), and 7th (2016-2020) Five Year Plans, Perspective Plan (2010-2021), Perspective Plan (2021-2041), and Delta Plan 2100. His latest 2019 publication is the book, Bangladesh Trade Policy for Growth and Employment.