RESTRICTEDWORLD TRADE
ORGANIZATIONWT/TPR/G/68
3 April 2000
(00-1339)
Trade Policy Review Body Original: English
TRADE POLICY REVIEW
BANGLADESH
Report by the Government
Pursuant to the Agreement Establishing the Trade Policy Review Mechanism
(Annex 3 of the Marrakesh Agreement Establishing the World Trade
Organization), the policy statement by the Government of Bangladesh is
attached.
Note: This report is subject to restricted circulation and press embargo until the end of the meeting
of the Trade Policy Review Body on Bangladesh.Bangladesh WT/TPR/G/68
Page 3
CONTENTS
Page
I. THE EXTENT OF TRADE LIBERALIZATION 5
II. THE STRUCTURE OF TARIFFS 6III. ECONOMIC PERFORMANCE 7IV. DIFFICULTIES IN IMPLEMENTING THE GATT/WTO AGREEMENT 8
(1) T
HE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES AND THE 
AGREEMENT ON ANTI-DUMPING 8
(2) P RODUCT STANDARDIZATION AND SANITARY AND PHYTOSANITARY REGULATIONS 9
(3) T HE TRIPS A GREEMENT 9
(4) T HE AGREEMENT ON IMPLEMENTATION OF ARTICLE VII (C USTOMS VALUATION )1 0
(5) N OTIFICATION OBLIGATIONS 10
(6) M ARKET -ACCESS PROBLEMS 11
(7) O THER ISSUES 11
V. EXPORT LED GROWTH AND TECHNICAL ASSISTANCE PROGRAMME 11Bangladesh WT/TPR/G/68
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I. THE EXTENT OF TRADE LIBERALIZATION
1. Bangladesh along with other developing countries joined the WTO at the culmination of the
Uruguay Round (UR) in order to avail the advantages of an open and liberal trading system.  This was
to strengthen the domestic production base and competitive position and to, inter alia , avail the
opportunity to negotiate for enhanced market access in major developed and newly industrialized
countries.  In Bangladesh, the trade liberalization process started in the mid 1980s.  The Governmenthas since undertaken a number of bold steps, which include liberalization of the trade and foreign
investment regime, strengthening the financial sectors, legislative and regulatory framework, closing
and privatizing some loss-making state-owned enterprises (SOEs), adjusting or abolishing some
administered prices, broadening the base of VAT collection and taking steps to improve governance.
2. In respect of trade liberalization, export diversification and import liberalization received the
highest priority in the earlier years.  This consisted in permitting the exporters of non-traditional items
to convert some of their export earnings at the higher exchange rate in the secondary market,
reduction of the tariff level and tariff dispersion, simplification and rationalization of the tariff
structure, and deregulation of the import process.  The result was reduction of QRs and some tariff
cuts by the mid 1980s.  These reforms led to higher growth of non-traditional exports and theemergence of a more diversified export structure.  The "positive list" carried over from the
pre-liberalization days was replaced with a smaller "negative list", which specified items not to be
imported without official sanction.
3. Towards the end of the 1980s, import liberalization leapt forward stimulating the export
sector with some additional incentives.  The number of items on the negative list was progressively
reduced.  As far as import items subject to QRs were concerned, about two thirds of HS 8-digit items
for the whole economy in 1987 had been made eligible for free entry into the country and only aboutone eighth of the items remained banned.  This was a substantive progress when set against the highly
protected trade regime in place at the beginning of the 1980s.
4. In the 1990s the liberalization process was accelerated.  A major thrust of change was the
substitution of the multiple-rate sales tax by a 15% VAT.  The successive budgets also announced
progressive reduction of tariff and non-tariff barriers.  By 1994, the share of free import items rose to94% of all HS 8-digit items and only 0.4% remained banned.  During this process, the pace of
liberalization in the import of intermediate and capital goods moved much faster than for consumer
goods.  76% of intermediate and 73% of capital goods were already allowed unrestricted import in
1987;  this share increased to 97% and 93%, respectively, in 1994.  In addition to the dismantling of
non-tariff restrictions, there has also been a drastic cut in nominal protection rates over the years.Tables 1 and 2 summarize the reductions in tariff and non-tariff barriers as a result of this
liberalization process.
Table 1
Trends in average and dispersion of tariffs, FY1991-2000
(Per cent)
Description 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Number of tariff rates 17 17 14 11 5 6 6 6 6 4
IDS (Infrastructural
Development Surcharge)-- -- -- -- -- -- -- 2.5 2.5 2.5
Average licence fee -- 1.2 1.4 1.5 1.5 1.2 1.3 1.3 1.0 --
Top customs duty rate 350 350 300 300 60 50 45 42.5 40.5 37.5
Source: BBS;  NBR.WT/TPR/G/68 Trade Policy Review
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Table 2
Average import-weighted tariff in Bangladesh, FY1991-1999
(Per cent)
Import categories 1991 1992 1993 1994 1995 1996 1997 1998 1999
Intermediate inputs 24.1 24.1 23.6 22.9 26.3 22.43 21.40 20.95 21.45
Capital goods 18.7 18.7 18.4 16.1 12.5 9.61 10.81 8.38 8.57
Final Consumer goods 47.3 47.3 36.5 36.7 26.4 23.57 24.85 17.56 11.19
All imports 24.1 24.1 23.6 24.1 20.8 17.01 17.90 16.06 14.68
Source: NBR.
II. THE STRUCTURE OF TARIFFS
5. It can be seen from information in the above table that the maximum tariff (customs duty) rate
was reduced from 350% in FY91 to 40% in FY 99.  Under the FY2000 Budget, the maximum tariff
rate was reduced further to 37.5%.  In contrast to the vary high tariff rate that prevailed in the early1990s, reductions achieved in the maximum as well as the average tariff rates are significant.
However, the average rate is pulled down substantially because many of the non-competing imports –
such as locally unavailable raw materials and machinery/equipment – enter at zero or very low rates.
Competing imports face higher tariff rates, nearly 25% of tariff lines (mainly finished products) face
the maximum tariff rate.
Table 3
Phased removal of quantitative restrictions, FY1990-2002(Number of 4-digit HS Codes)
Trade reasons
Import policy
orderTotal banned and
restrictedBanned Restricted MixedNon-trade reasons
1990-91 239 93 47 39 60
1995-97 120 5 6 17 92
1997-2002 129 7 9 17 96
Source: Ministry of Commerce.
6. The percentage of items subject to trade-related quantitative restrictions has been reduced
from 40% to 2%, at the HS 8-digit level.  Most of these developments have taken place since 1992.
As a result of these reforms, the unweighted average tariff has fallen from 89% in 1990/91 to about
20% in 1998/99, while the import-weighted average tariff has declined from 30% to about 16%.
7. The lowering of tariffs and the withdrawal of quantitative restrictions has, over the years,
contributed to reducing the spread between the official exchange rate and the market exchange rate.
The foreign exchange market was unified in 1992, and Bangladesh accepted the obligations of
Article VIII of the IMF in 1994, making the taka fully convertible for current account transactions.
8. Trade liberalization in Bangladesh appears to have progressed at a faster rate than in many
neighbouring countries.  Bangladesh exporter have been very successful in penetrating the highly
competitive markets of the European Union and the United States.  In some cases the quota utilizationrate for different categories of apparel has recently been nearly 100% in Bangladesh.  Over the years,
Bangladesh has been able to improve product quality and has gained greater acceptance in
international markets, with apparel exports increasing from 5.2% of total world imports in 1995 to
6.8% in 1997.  Garment exporters have gradually moved up-market in recent years and are
increasingly exporting sophisticated items like high quality suits, jackets and branded items.  In recentyears some exporter have also been successful in penetrating Japan's extremely quality consciousBangladesh WT/TPR/G/68
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market.  As a result, merchandise exports, led by the garments industry, grew at an impressive annual
average rate of 17% in US dollar terms between 1990/91 and 1997/98.  However, the export base has
been very narrow, with bulk of the foreign exchange earnings coming from a few sectors.  The
removal of the Multi-Fibre Arrangement quotas in 2004, under the Uruguay Round Agreement on
Textiles and Clothing, might result in Bangladesh losing its preferential access in these markets.
While Bangladeshi exporters have started competing effectively in global markets, the phasing out ofpreferential access and the abolition of quotas, scheduled for 2005, will require them to increase their
efficiency, improve product quality and ensure that their products are competitively priced.
9. The Government is taking a number of steps to improve trade-related infrastructure, both
physical and institutional, to meet the challenge of the dynamics of the present and future trends in
trade.  Addressing these constraints should enable the private sector to diversity intohigher-value-added products and decrease the economy's dependence on a few items.  The
Government is aware of the urgent need for building trade management capacity and in this respect
has launched a long-term Customs and Tax Modernization Program.  Initiatives are also in progress
for strengthening the capacity of the Bangladesh Tariff Commission to provide effective assistance to
the Government and the private sector in meeting obligations of WTO rules and various regionalcooperation agreements.  Over the medium term, customs is expected to evolve into a trade-
facilitating agency.
III. ECONOMIC PERFORMANCE
10. Economic performance is the result of the influence of a host of factors – quantitative and
qualitative.  It is rather difficult to disentangle precisely the contribution of trade liberalization to
economic performance.  However, the significance can be indicated by associating trade liberalization
to the change in some macroeconomic indicators li ke GDP growth rate, the rate of inflation, export
performance, current account balance, etc.  Thus, trade liberalization appears to have contributed,
together with other market-oriented reforms and sound macroeconomic management, to improved
macroeconomic performance.  The people of Bangladesh have benefited from the improvement in
policies, with growth in GDP per capita accelerating to 3.2% per annum during 1991-98 compared
with 1.7% during 1984-90.  Per capita GDP growth rates in both periods would have been higher hadit not been for the disaster proneness of the country, which saw the devastating floods of 1987, 1988
and 1998 and the catastrophic cyclone in 1991.  Financial year 1999 has been a difficult year for
Bangladesh.  The floods of 1998 imposed hardship on the lives of millions of people and caused
colossal losses to the economy.  The adverse impact of the floods, notwithstanding, actual perfomance
of the economy was far better than expected after the floods.  Timely initiative of the Government andthe courage of the people have played an important part in the process of recovery.
11. It is expected that GDP growth rate will reach 5.47% in FY2000 compared with 4.88% during
FY99.  Long-term trends of changes in sectoral co mposition of GDP show that the relative share of
the agriculture sector declined from about 30% of  GDP in the early 1990s to  around 25% in the late
1990s.  On the contrary, the share of the manufacturing sector increased from 12-13% to 15-16% ofGDP during the corresponding period.  The shares of other sectors of the economy remained
relatively stable over the same period.  These changes indicate that while output of agriculture has
increased on a sustained basis, its relative contribution has been declining and those of the industry
and the services sector have been increasing over the years.  The recent variations do not indicate
reversal of the trend, but the impact of temporary shocks.
12. The agriculture sector, which provides about one fourth of the GDP, overcame the impact of
the floods.  The progressively liberalized trade- policy environment and the resulting increase inWT/TPR/G/68 Trade Policy Review
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exports in the 1990s have improved Bangladesh's external position.  The current account deficit
excluding grants improved from 2.2% to  1.2% of GDP from 1996/97 to 1997/98.
13. The budget deficit during FY99 has been estimated at 5.3%, up from 4.2% of GDP in the
previous year.  An expansionary monetary policy was pursued with Broad money (M2) increasing by
12% in the twelve months ending April 1999 compared with an increase of 8.7% in the preceding
year.  During the first two quarters of FY99 there was an upward pressure in prices but after the new
harvest, the inflation rate declined.  Primarily due to lower food prices, the quarterly adjusted inflation
rate fell from 12.7% in December 1998 to 7.5% in April 1999.
14. The FY2000 Budget has emphasized mobilization of domestic resources, promoting
export-led industrial expansion, and poverty alleviation.  It has introduced changes in taxation to
expand revenues and improve efficiency in the tax system.  To encourage private investment in theexport sector, floating government bonds amounting to about US$200 million have been offered to
attract resources for industrial investment.  Progress has also been made in enacting laws and setting
up special courts to deal with loan defaulters, opening up the telecommunications and energy sectors
to private investment, and improving cost recovery for public services.
IV. DIFFICULTIES IN IMPLEMENTING THE GATT/WTO AGREEMENT
15. Bangladesh has been facing various difficulties in implementing the GATT/WTO Agreement.
Some of these difficulties, which have largely stemmed from the relatively low level of human
resources development and weak institutions in the country, are noted below:
(1) T
HE AGREEMENT ON SUBSIDIES AND COUNTERVAILING MEASURES AND THE 
AGREEMENT ON ANTI-DUMPING
16. The SCM Agreement prohibits or restricts the use of subsidies that have trade-distorting
effects.  Export subsidies on industrial products ar e prohibited.  However, as an LDC, Bangladesh is
exempted from this rule.  In any case, Bangladesh is not providing subsidy to any export product.
LDCs are, however, prohibited like other member countries from using export subsidies on
agricultural products.  Bangladesh does not provide any subsidy to her agricultural exports.  So, there
is no immediate need for Bangladesh to modify her subsidy practices.
17. Steps have been taken to develop the legal and institutional framework in Bangladesh with
the aim of achieving the ability to impose anti-dumping and countervailing measures as and when
necessary.  The Bangladesh Tariff Commission has been given the responsibility of acting as the
investigating authority with regard to anti-dumping and countervailing action.  Realizing that a strong
Tariff Commission is necessary for undertaking invest igations and other actions as laid down in the
relevant WTO Agreement for taking anti-dumping and countervailing action, the Government hasbeen taking steps to strengthen this institution.  A major objective of the Bangladesh Export
Diversification Project, largely financed by the IDA, is to build capacity within the Tariff
Commission to analyse WTO-related issues and also the enable the organization to undertake
anti-dumping and countervailing action when necess ary.  The Tariff Commission will also be further
strengthened once trade-related technical assistance under the Integrated Framework is madeavailable.
18. Knowledge and understanding of WTO rules and regulations has not yet been adequately
disseminated among the business community in Bangla desh and they are not even fully aware of the
rights which they have to request the Government for relief when they are adversely affected by
unfair trade practices of foreign suppliers.  This ha s also contributed to the difficulty faced in taking
anti-dumping or countervailing action where necessary.  Capacity building in the private sector isBangladesh WT/TPR/G/68
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being addressed under the Bangladesh Export Diversification Project and some other TA projects.
But existing initiatives are not adequate to equip the private sector to face the problems.
(2) PRODUCT STANDARDIZATION AND SANITARY AND PHYTOSANITARY REGULATIONS
19. The Code of Good Practice of the TBT Agreement exhorts countries like Bangladesh to adopt
voluntary standards and calls on them to ensure that their national standardizing bodies follow rules
and procedures similar to those followed by developed countries in designing technical regulations.The Agreement also calls for the establishment of an  "enquiry point" for the purpose of disseminating
information on technical regulations, voluntary standards and on conformity assessment procedures.
Adoption of international standards has not been an easy task in Bangladesh.  On the one hand, it has
imposed additional financial burden on exporting firms, which has led to an erosion of their
competitive strength.  On the other hand, Bangladesh lacks the expertise and institutional mechanismrequired for adopting international standards.  Bangladesh has only one national testing and
certification organization – the Bangladesh Standards and Testing Institute (BSTI).  It is holding
seminars, awareness programmes, and training  programmes on ISO-9000 and ISO-14000 standards,
and has already adopted ISO 9000/14000 series of International Standards as Bangladesh National
Standards.  BSTI has developed about 1,700 national standards on various products and services.BSTI has so far issued more than 3,000 certification marks of quality to various products following
lawful and approved procedures of inspection and testing of products, as a conformance towards
standards specification.
20. The provisions of the Agreement on Sanitary and Phytosanitary Measures are quite similar to
the TBT Agreement.  Technical standards have been set in both Agreements, and these must be
fulfilled by exporters in order to gain market access in developed countries.  However, unlike the TBT
Agreement, which calls for application of product standards regulations on an MFN basis, the SPSAgreement permits discriminatory application of sanitary and phytosanitary measures according to the
country of origin of imports.  This is a matter of concern to Bangladesh since there is the probability
that her agricultural exports may face more stringent SPS measures compared with other countries in
view of her LDC status and the associated stigma of lower levels of health and sanitary conditions.
21. On the part of Bangladesh, a major response to the SPS Agreement will be to sensitize
exporters about the SPS regulations that are applicable in different importing countries.  This will
require the collection of information relating to SPS regulations applicable in various countries and
disseminating the same to potential exporters.  This is by no means an easy task.  In case of
infringement of rules contained in the SPS Agreement in the application of SPS measures by an
importing country, the Agreement provides that the matter may first be taken up with the importingcountry and then, if necessary, with the appropriate WTO forum.  The potential problem here is that
lack of knowledge of WTO rules on the part of Bangladesh's exporters may prevent them from
approaching the Government to seek redress in case of  an infringement of rules.  An attempt is being
made to raise the level of awareness of the concerned quarters through the holding of seminars and
workshops on the TBT and SPS Agreements.  Any assistance from WTO in this respect would bewelcome.
(3) T
HE TRIPS A GREEMENT
22. The Agreement on Trade-Related Aspects of Inte llectual Property Rights (TRIPS) has broken
new ground by defining the main elements of protection, the rights to be conferred, and the minimum
term of protection for intellectual property.  The minimum standards of protection laid down in the
Agreement require the modification of IPR legislati on in Bangladesh.  As an LDC, Bangladesh has an
11-year transitional period (i.e. up to 1 January 2006) to accept and implement the obligations of theWT/TPR/G/68 Trade Policy Review
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TRIPS Agreement.  Bangladesh has laws covering patents, industrial designs, trade marks, copyrights
and related rights.  However, these laws need to be modified substantially to bring them into
conformity with the provisions of the Agreement.  In the case of patents law, provisions had to be
made for protecting pharmaceutical products, plants and plant varieties, and geographical indications.
The law on trade marks has to be extended to cover protection of service marks.  Similarly, the law on
copyrights has to be extended to provide protection to computer programs.  Work in these areas hasalready been initiated.  A revised law on copyrigh t, in conformity with the obligations under the
TRIPS Agreement, has already been approved by Cabinet and is expected to be placed before
Parliament soon in the form of a Bill.  A relative shortage of experts in international law and
technically well-qualified people in the above areas have posed difficulties in the modernization and
modification of existing IPR legislation.  Both institutions and human resources in the area ofintellectual property have to be developed during the transitional period, and this is the challenge
facing Bangladesh.
(4) T
HE AGREEMENT ON IMPLEMENTATION OF ARTICLE VII (C USTOMS VALUATION )
23. The present system for valuation of imported goods in Bangladesh is based on the Brussels
Definition of Value (BDV), a system develope d by the World Customs Organization (WCO).
Bangladesh has to switch to a method of valuation as laid down in the WTO Agreement on Customs
Valuation.  This change would not require any radical departure from the existing practices and
procedures since, from the operation point of view, there is no significant difference between the two
methods of valuation.  Unlike the BDV, which is based on a "notional concept" of price of import,
valuation under the WTO Agreement is based on a "positive concept".  The Agreement lays down
stricter disciplines by providing five methods to be used in valuation and that too in hierarchical order.
No method other than those stipulated in the Agreement can be used.
24. The primary basis for customs valuation under the Agreement is "transaction value".  As an
LDC, Bangladesh had the benefit of a transitional period, which allowed her to switch over to the
WTO valuation system by 1 January 2000.  Bangladesh has in fact changed over to the "transaction
value" system from February 2000.  Adoption of the WTO customs valuation system has entailed
modernization and computerization of the customs clearance procedures.  The more difficult part,however, is to train the customs officials in the application of the new rules.  In applying the new
system, they must accept greater discipline to reject the transaction value if necessary and determine
dutiable value using the five methods provided in the Agreement.  Modernization of the Customs
Department and training of the customs officials ha ve recently been undertaken under the World Bank
financed Bangladesh Export Diversification Project.  Successful implementation of the project isexpected to lead to significant customs service delivery improvements.
(5) N
OTIFICATION OBLIGATIONS
25. Bangladesh has, to date, sent seven notifications to the WTO, which include, inter alia ,
notifications on textiles and clothing, import licensing procedures, etc.  This is partly attributable to
shortage of manpower and low technical capability for handling notification obligations.  Theproblem has been compounded by the lack of any database on the implementation of WTO
commitments in various ministries.  Although the WTO has prepared a handbook aimed at helping
developing countries in preparing the required notification on standard formats, there is need for
additional assistance for capacity building.  In the recently concluded Round Table on IF, Bangladesh
has highlighted the need for related capacity building and has proposed a specific TA project for
establishing a WTO reference centre.  This has attracted the attention of the donors and some
assistance is expected soon.Bangladesh WT/TPR/G/68
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(6) MARKET -ACCESS PROBLEMS
26. Market access issues are becoming increasingly complex.  The major market-access problems
faced by Bangladesh relate to:  (a) non-tariff and para-tariff barriers;  (b) stringent quality and
standards requirements;  (c) stringent rules of origin criteria;  and (d) strict labour and environmental
standards.  Bangladesh is facing market-access problems in the United States (quota, labour standards,
quality requirements like HACCP for frozen food, eco -labelling in case of ready-made garments) as
well as in the European Union (rules of origin, quality and standards requirements, eco-labelling).
Similar problems are also being faced in Japan, Australia and New Zealand.  It needs to be
appreciated that for an LDC like Bangladesh market access is an issue of paramount importance and
unless Bangladesh gets preferential market access from the developed countries, she will continue to
face difficulties in promoting export-led growth.  The special and differential clauses in various WTOagreements are of particular relevance in this regard.  Bangladesh has been consistently advocating, in
all related international fora, duty-free and quota-free market access for LDC goods, including those
from Bangladesh, in the developed country markets.  It is well known that a number of commitments
have been made by developed countries in this regard.  It is now only a matter of sincere
implementation of these market-access commitments by developed countries.
(7) O
THER ISSUES
27. Bangladesh is not a signatory to the WTO-brokered IT Agreement.  Despite this, steps have
recently been taken to liberalize IT policy in the country.  While the import of IT equipment has been
made duty free, the Government has also reduced the charges for acquisition and distribution of the
services of V-SAT.  An IT village has been set up near Dhaka.  Bangladesh has also decided to link
up with the sub-marine fibre-optic cable in the Bay of Bengal with a view to strengthening her linkage
with the international IT infrastructure.  We have taken up a crash programme to produce 10,000 ITprofessionals per year.  What we now need is assured market access for our IT products and easy
entry of our IT personnel in the developed markets.
28. In addition to market  access, Bangladesh needs to strengthen her export supply capacity to
increase her exports.  The IDA-funded Bangladesh Export Diversification Project is being
implemented to address some of the problems of the export supply side.  However, more needs to bedone to build up trade-related supply capacity.  Since this work is largely constrained by the shortage
of resources, there is need for both technical assistance and financial assistance in this regard.  Here, it
is worth mentioning that Bangladesh is one of the few LDCs who have gone a long way in taking
concrete steps for speeding up the Integrated Fram ework (IF) process, and has now identified the
constraints in integrating her export regime in the multilateral trading system.  A list of priorityprojects to address the identified export supply constraints has also been drawn up and circulated
among the donors and partners in trade for their consideration.
V. EXPORT LED GROWTH AND TECHNICAL ASSISTANCE PROGRAMME
29. Even though Bangladesh's exports have recorded robust growth in recent time, such exports
have been marked by high commodity concentrati on.  Garments, for example, account for nearly 70%
of our total exports at present.  There is, therefore, an urgent need for diversifying the export basket
through strengthening the export supply capacity of the country. This would call for, among other
things, development of physical infrastructure, trad e-related institutions and human resources.  The
implementation of World Bank financed Export Dive rsification Project is not sufficient.  We have
identified 34 projects under "Integrated Framework for Trade-Related Technical Assistance to Least
Developed Countries' Initiative" of WTO, UNCTAD, ITC, UNDP, IMF and World Bank. A Round
Table Meeting of trade-related technical assistance projects was held in Dhaka on 22
nd January thisWT/TPR/G/68 Trade Policy Review
Page 12
year.  Generous supports of our trade and development partners for the implementation of these
projects is urgently required.  Paucity of resources and lack of necessary technical knowledge have
held back progress in these areas.
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