Dhaka retains duty-free access for exports to UK, but it depends on human rights, political freedom

Infographic: TBS

The UK's Developing Countries Trading Scheme (DCTS) has come into effect from Monday, 19 June, with simplified rules and tariff cuts that will facilitate more products entering the UK market from 65 developing countries including Bangladesh.

"Bangladesh is due to graduate from Least Developed Country status in 2026. Changes made to the DCTS mean Bangladesh will retain duty-free access for 98% of exports, including readymade garments. It is more generous than the European Union's scheme the UK was previously a member of," says a British High Commission release in Dhaka on Monday, reports UNB.

Under the new scheme, Bangladesh will be able to participate in global value chains involving raw materials from 95 countries to export their final products to the UK duty-free, provided they meet certain requirements, it says.

The announcement comes as a relief for Bangladesh as traders and policymakers were worrying about the status of trade with the UK since the country exited from the European Union.

"This new scheme demonstrates the UK's commitment to a modern and mutually beneficial partnership with Bangladesh," says the release, stating the DCTS will help grow trade, boost jobs, and drive sustained economic growth.

However, retention of DCTS preferences is based on respect for human and labour rights and compliance with relevant international conventions, including those on civil and political rights, anti-corruption, climate change and the environment, it reminds.

"The DCTS promotes free and fair trade, human rights, and good governance," says the High Commission.

The DCTS makes it easier to produce goods using components from other countries without losing duty free status.

The British High Commissioner to Bangladesh, Sarah Cooke, said the DCTS will support Bangladesh's manufacturing capacity, increase long term economic growth and resilience, and allow it to access global supply chains, reports UNB.

"It benefits the UK through greater consumer choice and competitive prices. This announcement underscores our commitment to a modern and mutually beneficial partnership with Bangladesh, based on deeper, economic and trade ties and global standards."

The scheme will contribute to developing countries' integration into the global economy, creating stronger trade and investment partners for the future, and strengthening supply chains, it adds.

Exporters are upbeat with the announcement and expecting a further boost in exports to the UK market.

Talking with The Business Standard, BGMEA Vice President Shahidullah Azim said the DCTS scheme will create an opportunity for Bangladesh's exports to the UK market, especially "when we will lose duty-free market access after LDC graduation."

He also mentioned that this facility will also be helpful to negotiate with other countries after graduation.

The BGMEA vice president, however, said there is no fear about maintaining compliance and labour rights issues as the Bangladesh apparel industry already maintains the standards which are beyond the standards they set.

"There are two parts, one is for entrepreneurs and the other part refers to the government," Azim added.

The UK's total imports from Bangladesh surged by 54.0% to £3.8 billion ($4.86b) in 2022. At the same time, UK exports to Bangladesh increased by 36.7% to reach £897 million ($1.15b) during the same period, according to the data released in May by UK's Department for Business and Trade.

Apparel exporters Tusuka Group's chairman Arshad Jamal Dipu welcomed the UK's scheme, saying it is a very positive step. "We hope our exports will increase there even after the LDC graduation if the scheme remains in force," he said.  

Syedur Rahman Ranu, president of British Bangladesh Chamber of Commerce & Industry (BBCCI), the initiative taken by the UK is good news for Bangladesh. "It will boost export potentials for non-RMG products too."

Though the new scheme would reduce value addition criteria from 30% now to 25% for developing countries and relax the condition for ratifying 32 international conventions, issues like human rights violation might still matter, trade researchers said.

Dr Mohammad Abdur Razzaque, an international trade expert and chairman at Research and Policy Integration for Development told TBS that the adherence to 32 international conventions is not mandatory for the UK as it is for the EU. "It means Bangladesh will get some relief in issues like human rights. But the UK will reserve this right to review in case of any violation," he says.

Md Touhid Hossain, former foreign secretary told TBS, "It is useless to judge now if the trade conditions are justified for us or not, rather we have to accept those and get prepared." He said it is assumed that Bangladesh might have to adhere to conditions if it wants to get benefits. "At best we can bargain, there is no point in thinking otherwise," the former diplomat said, pointing out that most of the issues like labour rights, civil rights, political rights are all recognised in our constitutions.

Having left the EU, the UK was planning to relax import terms and launch the Developing Countries Trading Scheme this year to replace the Generalised Scheme of Preferences (GSP) to facilitate more trade with developing countries such as Bangladesh.

The scheme, which will offer lower tariffs and simpler rules of origin requirements for exporting to the UK, could increase Bangladesh's exports of readymade garments to the UK two and a half times to $11 billion by 2030, a study by the private research organisation Research and Policy Integration for Development (RAPID) said in March.

According to RAPID data, Bangladesh has gained most of the share lost by China in the UK market.

"As some conditions have been relaxed in the DCTS and China's market share is declining there, the growth rate (of Bangladesh's RMG exports) could be 10% till 2026," RAPID chairman Dr Mohammad Abdur Razzaque forecasts.  

Data shows Bangladesh now holds the second position in the UK market with its share in the UK apparel market doubling to over 14% in 11 years to 2021, when China's share fell from 37% to 21%.

Though the new scheme would reduce value addition criteria from 30% now to 25% for developing countries and relax the condition for ratifying 32 international conventions, issues like human rights violation might still matter, trade researchers said.