RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/BOP/R/76 
3 December 2004 
 (04-5283) 
Committee on Balance-of-Payments Restrictions  
  
 
 
REPORT ON THE CONSULTATIONS WITH BANGLADESH 
 
 1. The Committee on Balance-of-Payme nts Restrictions met, to consult with Bangladesh under 
Article XVIII:B on 29 November 2004.  The consu ltations were held under the Chairmanship of 
Mr. Giulio Tonini (Italy) in accordance with th e Committee's terms of reference, and pursuant to 
Article XVIII:12(b) of GATT 1994 and the Unders tanding on Balance-of-Payments Provisions of 
GATT 1994.  The IMF was invited to participate in the consultations in accordance with Article XV:2 
of GATT 1994. 
2. The Committee had before it the following documents: 
 WT/BOP/S/13 Consultations with Bangladesh 2004 – Background Document by the 
Secretariat (16 November 2004) 
 WT/BOP/R/50 Report on the Consultatio ns with Bangladesh (6 June 2000) 
 WT/BOP/R/57 Report on the Consultations with Bangladesh (23 January 2001)  WT/BOP/R/60 Report on the Consultatio ns with Bangladesh (18 March 2002) 
 WT/BOP/R/64 Report on the Consultations  with Bangladesh (21 November 2002) 
 WT/BOP/N/54 Notification Under Paragraph 9 of the Understanding on the Balance-of-
Payments Provisions of the Genera l Agreement on Tariffs and Trade – 
Communication from Bangladesh (15 December 2000) 
 WT/BOP/N/62 Notification Under Paragraph 9 of the Understanding on the Balance-of-
Payments Provisions of the Genera l Agreement on Tariffs and Trade – 
Communication from Bangladesh (18 February 2004) 
 WT/BOP/G/13 Consultations with Bangladesh – Basic Document Supplied by Bangladesh 
(23 November 2004) 
 WT/BOP/W/27 Report (2004) of the Committee on Balance-of-Payments Restrictions – Draft 
(23 November 2004) 
A. O
PENING STATEMENT FROM THE REPRESENTATIVE OF BANGLADESH  
3. The statement by the representative of Bangladesh  is attached as Annex 1.   
B. STATEMENT FROM THE REPRESENTATIVE OF THE IMF 
4. The statement from the representative of  the IMF is attached as Annex II. WT/BOP/R/76 
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C. D
ISCUSSION IN THE COMMITTEE  
5. A Member commended Bangladesh on its economic  performance and welcomed the ongoing 
tariff reduction.  He noted that exports to Canada  from Bangladesh had doubled from 2 to 4 per cent, 
that debt ratios had improved while  the level of reserves could usefully be increased.  He recognized 
the vulnerabilities of the Bangladesh economy and s upported the existing plan with regard to the 
balance-of-payments situation.  Another Member added that Bangladesh faced challenges from the 
phase out of the Agreement on Textiles and Clot hing that he hoped would not aggravate their 
situation but rather that Bangladesh c ould overcome these serious impediments. 
D. CONCLUSIONS OF THE COMMITTEE  
6. Members recognized that Bangladesh had, in 2002, been granted justification under the 
balance-of-payments provisions to restrict the im port of chicks, eggs, common salt and cartons until 
2009.  They welcomed the dismantling of other r estrictions in accordance with the time table 
submitted in WT/BOP/N/54 and looked forward to th e notification by the Government of Bangladesh 
regarding the final elimination of quantitative rest rictions on these items on 1 January 2005.  On the 
understanding that Bangladesh would submit a time table for the remova l of the remaining restrictions 
by 2007, it was agreed that the next consultations would be held in the spring of 2007.  
  WT/BOP/R/76 
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ANNEX I 
 
Statement by the representative of Bangladesh  
  
1. Bangladesh had notified the Committee on Balance-of-P ayment Restrictions of a detailed list of 
items restricted or banned in accordance with th e provisions of Article XVIII:B of GATT.  The list 
contained 17 tariff line items.   
2. In accordance with the consultations held  under the BOPR, in May 2000, Bangladesh 
submitted a phase out of restrictions on eleven cate gories of products within January 2005.  Since 
those consultations, Bangladesh has already withdrawn restrictions on seven categories of products.  
The details of the products on which restrictions ha ve been withdrawn are listed in Table 7 of the 
Bangladesh Government’s paper submitted for this Meeting. 
3. This year, in the process of removing the rest rictions on products wh ich fall under tariff line 
17.01, in advance of the deadline in 2005, we ha ve maintained some quantitative restrictions on a 
small sub-category, which is a variety of molasses (in our language, edible gur).  This is an agro-
based product, with large numbers of people in the rural areas seasonally dependent on it.  In addition 
to providing an income source, gur is a cheap altern ate to sugar for the low-income community.  In a 
very crude form, molasses is also mixed with ca ttle feed.  This is a temporary restriction. 
4. Bangladesh currently maintains restrictions on import of nine categories of products, as 
shown on Table 6.  Among these, are four categories of products namely chicks, eggs, carton and salts 
where the restrictions have been approved by the WTO until 2009.  The removal of restrictions on the 
remaining five categories is scheduled in January 2005.   
5. Perhaps a few words about the economy may be  helpful to Members in understanding the 
circumstances.  The economy has opened up to the outs ide world in a remarkable manner, particularly 
since the early 1990s.  The ratio of trade to GDP  is over thirty percent, which makes the economy 
extremely vulnerable to external shocks.  While ther e has been growth in exports (except in the 2001-
2002), imports have increased as well.  The merchandi se trade deficit may not be sustainable.  There 
are two reasons for this:  first, export of apparel or clothing constitutes more than three-quarters of 
total exports;  and, second, inward remittances from Bangladeshis temporarily working abroad 
finance more than three billion dollars of imports.  There may be wide fluctuations in both these areas, 
depending on factors beyond our control. 
6. Earlier, I had referred to the export of appa rel and clothing constituting more than three 
quarters of our export earnings.  The phase out of the quota system, from 1
st January 2005, is likely to 
have a major impact on trade in this area.  Current  predictions indicate that Bangladesh’s exports of 
such products may be severely affected.  Even by  conservative estimates, the net export loss may be 
in the order of three-quarter of a billion dollars.  The implications on the economy are expected to be 
enormous.  Over the last two years, we have had a foretaste of what is likely to come, from our 
experience in the products where the quotas have been lifted in the US market.  Our exports to that 
market have dipped.  There is no way an economy like Bangladesh’s can cushi on the impact of such 
shocks.  The reverberations will be felt throughout the economy.  We expect a difficult time ahead, 
particularly in external trade. 
7. The other source of shocks to the economy is fro m floods and other disasters.  This year, we 
have had a major flood, resulting in severe losses.  Much of the government expenditure that would 
otherwise have gone to development has had to be diverted to relief and rehabilitation of the flood 
victims.  In addition, repair of the infrastructur e damaged by the floods will be a major expenditure 
for the economy.  Apart from the devastation an d rehabilitation needs, such shocks reduce the 
flexibility available to the authorities. WT/BOP/R/76 
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8. To conclude, Mr. Chairman, the authorities in Ba ngladesh will need to take these, and other 
circumstances, into consideration when examining th e foreign trade regime in future.  As of now, I 
expect that the undertakings we ha ve given will be maintained.    WT/BOP/R/76 
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ANNEX II 
 
Statement from the Representative of the IMF  
  
Background  
1. The government has made significant progress in implementing the reform strategy adopted in 
June 2003 to move Bangladesh to a higher growth path and faster poverty reduction.  This strategy is 
being supported by a three-year arrangement under the Poverty Reduction and Growth Facility 
(PRGF) and further articulated in the authorities Interim Poverty Reduction Strategy Paper (I-PRSP). 
2. Bangladesh’s economic recovery under the PRGF-supported programme has been broad 
based.  Real GDP grew by 5½ per cent in FY04 (ending June), while indus trial production rebounded 
by 12 per cent, benefiting from a healthy expansion in the construction, manufacturing, and service 
sectors, as well as a strong recovery in exports.  Inflation remains under control at 5.8 per cent in 
FY04.  However, the floods in July have had de vastating effects on the economy, with the largest 
impact stemming from damages to crops, housing, a nd infrastructure.  The government is continuing 
its efforts to reallocate domestic resources for urge nt agricultural relief and reconstruction of housing 
and infrastructure, and restoring water and power supplies and other basic f acilities in the affected 
areas. 
3. Bangladesh’s external payment position remains r obust. Export growth has been stronger than 
projected, driven mainly by the ready-made garmen ts (RMG) and frozen food sectors.  Import growth 
also remains strong.  Together with continued la rge remittance inflows, the external current account 
was broadly in balance in FY04.  Overall, gross offi cial reserves rose to 3.1 billion US dollars at end-
September 2004, which is 2.8 mont hs of imports (from $2.5 billion at end-June 2003).  This has been 
accompanied by improved external competitiveness as the real effective exchange rate depreciated 
somewhat compared to FY03. 
4. Macroeconomic management has been broadl y on course.  The overall budget deficit was 
contained to 3¼ per cent of GDP in FY04.  Total spending was lower than budgeted on account of 
lower spending in both the recurrent and devel opment expenditures.  However, tax revenue 
collections by the National Board of Revenue (N BR) fell short of the budget target, reflecting 
remaining weakness in tax administration and lack of enforcement in collections.  The monetary 
policy stance has been prudent and remains supportive of growth, as broad money grew by 
14 per cent during FY04 with private sector credit rising by 12 per cent.  To contain the inflationary 
risks posed from increases in imported food pric es, concerted actions have been taken by the 
authorities to mop up excess liquidity.   
5. Good progress has also been made on structural reforms, particularly with respect to tax 
administration and strengthening the management of the nationalized commercial banks (NCBs).  
However, further efforts are needed  to translate the improvement in tax administration into revenue 
gains.  In addition, adhering to the reform ag enda for NCBs to operationalize the bank-by-bank 
resolution strategies will be critical for long-term sustainable growth. 
6. Faster and lasting growth needed for pove rty reduction will require sustained policy 
implementation and determined structural reforms to  tackle governance issues.  Enhancing investor 
confidence will require concerted actions to improve  law and order, and develop and implement an 
anti-corruption strategy.  Meanwhile, it will be im portant to strengthen the political consensus on 
reform and address capacity constraints.   WT/BOP/R/76 
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Outlook 
 
7. Looking ahead, Bangladesh is facing significant challenges posed by the phase-out of the 
Multifiber Agreement (MFA)
1 quota at end-2004.  On the upside, RMG exports have been growing 
faster than expected so far, and there are indicati ons of fresh investment in the sector despite post-
MFA threats.  Bangladesh should also be able to re tain some of the competitive edge in the EU and 
Canadian markets, given the continued duty-free acc ess, as well as some advantage in competing for 
the high-volume, low-margin segment of the world garment market.  On the downside, however, with 
intensified competition, Bangladesh is likely to f ace pricing pressure and lose significant market share 
in the United States, and continue to face f unding and implementation constraints in upgrading 
infrastructure, crucial for competitiveness. 
8. In preparation for the pending MFA shock, the authorities are taking measures to strengthen 
Bangladesh’s competitiveness, including removing dist ortions in the trade regime which are anti-
exports.  Starting in FY05, in the context of the PRGF programme, tariff inci dence has been reduced 
through a significant reduction in the level and di spersion of customs and supplementary duties.  
Moreover, the number of products subject to quantit ative restrictions was halved with effect from 
April 2004.  The number of regulatory stages involved in the import for and export of RMG has also been reduced and measures are being put in place to improve port operation, which will reduce the 
lead-time of orders.  Meanwhile, Bangladesh is seeking duty-free access for RMG exports in the US 
market, together with the other LDCs that are fa cing similar pressure from the removal of quotas.   
9. Although the impact of the MFA shock will be felt in the coming years, the current account 
should remain manageable.  The biggest effect is  expected during the second half of FY05 and FY06, 
a projected decrease in total exports of 2½ per cen t, with a gradual recovery thereafter to some 
5 per cent growth in FY08.  As RMG exports have  a high import-content, the impact on the current 
account should be somewhat reduced, and gross offi cial reserves are expected to remain around 
3 months of imports.  To assist Bangladesh to better cope with the MFA quota phase-out, the IMF 
Board agreed in July 2004 to an augmentation of  access (of 10 per cent of quota) under the PRGF 
arrangement, in accordance with the Trade Integration Mechanism (TIM). 
 
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1 The MFA was replaced by the WTO Agreement on Textiles and Clothing (ATC) in 1995 which set 
out a transitional process for the ultimate removal of those quotas.