Navigating competition policy in Japan-Bangladesh EPA negotiations

Photo: Reuters

The recent negotiation between Japan and Bangladesh in Dhaka regarding the terms of an Economic Partnership Agreement (EPA) is crucial for Bangladesh. This agreement, a type of Free Trade Agreement (FTA), is being initiated in the context of Bangladesh's upcoming graduation from Least Developed Country (LDC) status in November 2026, which will significantly impact the current trade dynamics between Bangladesh and Japan.

Upon graduation, Bangladesh is likely to lose the zero-duty export benefits currently available in the Japanese market. As a result, Bangladeshi exports to Japan could face tariffs of up to 18%, posing a severe threat to the country's export economy without an EPA in place. This would be a substantial setback, especially since 73% of its shipments are presently duty-free under LDC privileges. 

Japan is Bangladesh's 12th largest export market and seventh largest source of imports. Last fiscal year, bilateral trade reached $1.90 billion in exports and $2.02 billion in imports, underscoring the mutually beneficial economic relationship between the two nations. 

Besides Bangladesh's need, it is important for Japanese investments operating in Bangladesh to be able to compete in the market fairly. Under these circumstances, the governments of both the countries have attempted to negotiate terms of the EPA.

Among the 17 sectors identified for negotiation by the Japan-Bangladesh joint study group, competition policy stands out as a crucial area. It begs the question: what should be Bangladesh's competition policy position in the Japan-Bangladesh EPA?

Competition policy involves applying rules to ensure businesses and companies compete fairly with each other. This fosters enterprise and efficiency, offers consumers a wider choice, and helps reduce prices while improving quality. An effective competition policy can ensure a level playing field for businesses from both countries, fostering a competitive market environment.

This is particularly significant as Bangladesh aims to attract Japanese investments and broaden its economic reach. It is also important for Japan, considering the recent experience of Japan Tobacco International (JTI) in Bangladesh, to maintain Japanese corporate interest in Bangladesh. 

To that end, it is essential to ensure that Bangladesh's legal framework provides adequate remedies for victims of anti-competitive activities within the country. This article will highlight the issues Bangladesh might face in negotiating the competition policy chapter in the Japan-Bangladesh EPA.

Today, many FTAs between different countries around the world include competition chapters or rules. These rules serve various functions: they prevent private business practices from undermining trade, promote consumer welfare and economic fairness, and prevent discriminatory enforcement of competition laws.

Moreover, FTAs help harmonise competition laws between countries, reducing conflicts and the risk of trade wars. This harmonisation process allows countries to learn from each other's competition regimes, fostering closer cooperation and more effective enforcement of competition laws. 

By aligning competition policies, FTAs contribute to the development of global standards and prepare the ground for potential international competition agreements. 

As Bangladesh and Japan negotiate their EPA, understanding these functions can help Bangladesh create a robust competition policy framework that supports its economic goals.

To ease Bangladesh's graduation to the developing country status, the government is earnestly trying to bring in foreign direct investment (FDI). Proffering adequate relief against anti-competitive practices prevailing in the domestic industry is imperative to attract foreign investors. 

Till date, Bangladesh has signed 34 Bilateral Investment Treaties (BITs) and one FTA. These agreements typically include clauses about treating all trading partners equally (Most Favoured Nation or MFN) and treating foreign businesses the same as local ones (National Treatment), which are about non-discrimination in general. However, none of Bangladesh's agreements have ever included chapters or clauses on competition policy.

On the other hand, most of Japan's BITs or EPAs include chapters addressing competition policy. These Japanese agreements typically exclude competition policy from the dispute settlement process but include clauses on fairness and transparency (as seen in agreements with Thailand, Indonesia, India, and the EU). 

While these clauses match Bangladesh's legal framework, they conflict with how the Bangladeshi competition authority currently operates. 

For example, the competition authority in Bangladesh is currently adjudicating and pronouncing judgments without a member (law) present, and the same body both investigates and gives verdicts at the same time, violating natural justice.

Additionally, there is no clear framework for applying evidence law in these proceedings with regard to using expert opinion on economic evidence. No guidelines or regulations have yet been adopted by the Bangladesh Competition Commission to decide on issues related to relevant markets to scrutinise effects on competition in the market; neither the threshold for dominant position in the market has been decided as of yet. Therefore, if Japanese negotiators insist on procedural fairness, it could be challenging for Bangladesh. 

At least one Japanese agreement requires the other country to adopt or reform their competition laws (such as the Japan-Malaysia EPA 2003). Other agreements, like the EU-Japan EPA, require competition authorities to be operationally independent. This is a concern for the Bangladesh Competition Commission under the current legal framework. These issues are likely to be points of contention during the negotiations with Japan. 

At the same time, Bangladesh's competition regime is not up to global standards, as admitted by its competition commission. The Japan-Bangladesh EPA offers an opportunity to improve the legal framework, but Bangladesh must take a clear policy stance. 

Japan has significant experience in competition policy, unlike Bangladesh, which needs to study these implications thoroughly. There is still time, as EPA negotiations typically last one to two years. Bangladesh should focus on creating a robust competition policy to attract FDIs and achieve long-term economic goals.

Azhar Uddin Bhuiyan is a lecturer at the Department of Law, University of Dhaka. He can be reached at [email protected]

Disclaimer: The views and opinions expressed in this article are those of the authors and do not necessarily reflect the opinions and views of The Business Standard.