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TICFA: The Less Talked Topic

May 21, 2013

Bangladeshis are still in the dark about the contents and clauses of less talked Trade and Investment Cooperation Framework Agreement (TICFA). On Bangla blogosphere and opinion section of online media, we have come across several thought-provoking posts and articles, delineating the darker sides of TICFA.

As I have not seen the agreement, I have to rely on available resources and studies on impacts these agreements have on less developed economies.

There is even confusion about the term TICFA. One leading right-wing economist says that it is not an ‘outright agreement’. Does this mean it will be devoid of binding conditions? The USTR’s website defines it as ”although the name of the framework agreements may vary these agreements all serve as a forum for US and other governments to meet and discuss issues of mutual interests, with the objective of improving co-operation and enhancing opportunities for trade and investment.” So TIFA or TICFA, whatever we may call the agreement, is one step backward from a full-fledged Free Trade Agreement (FTA) and it will lay the cornerstone for future FTA.

Critics of this kind of treaty are arguing that this treaty will have adverse effects on our agriculture and service sectors. As a developed economy, USA excelled at service sector businesses. If TICFA is signed, Bangladeshis may lose their jobs to US nationals. Moreover, US financial service providers will gradually hold sway over Bangladesh’s financial sector, elbowing out local businesses. In the long run, Bangladesh will lose vital tax revenues since profit earned will be subject to tax exemption.

In the agriculture sector, we will see growing presence of US companies. They may, in the long run, play a role to decide the amount of subsidy Bangladesh spends every year on agriculture. It is important to note that agriculture subsidy influences the pricing of agricultural products. In addition, I think small-scale and subsistence farming, lifeline of Bangladesh’s agriculture, will be replaced by mechanized large-scale farming in a labor-intensive country like ours. Oxfam America did a study on the impact of FTA between USA and Columbia on small farmers. The study reveals that small farmers will face substantial income loss if the FTA takes into effect.

Many argue, including our commerce minister, that USA is tying up GSP facility with TICFA. According to the right-wing economist, the two are mutually exclusive issues.In fact, Bangladesh may end up signing TICFA and losing its GSP facility. But critics’ claim is finding its grounds since USTR’s office is dealing with both the issues. Is this a mere coincidence?

There are speculations that US authority has taken the corruption issue off TICFA but it has retained the labor issue. US have an immigration policy that allows anyone, from corrupt politician to runaway generals, to enter USA and to live in a free society that some of them despise very much at home. US authority knows that corruption issue is very sensitive to developing world. Because, the creamy layer part of the society, who will deal with such agreements, in this part of the world may find this issue very embarrassing.

Labor unrest should be resolved by Bangladesh’s own political dynamics. Such a large pool of labor force is also a vital factor for ballot politics. No political party wants to see them queuing behind the opposite side.

We can trash the argument that if GSP is withdrawn Bangladesh’s RMG export to USA will be severely hurt. It is true that the initial thrust of RMG sector was initiated by American quota facility. But today, this sector flourishes not because of any country’s grace or special policies. It is our sewing sisters’ skill and entrepreneurs’ entrepreneurship skills that survived this industry during the turbulent period of MFA phaseout and that help it remains unscathed in this current economic crisis ensued the global financial meltdown.

The RMG sector is just like the Adam Smith’s butcher who sells his product at the neighborhood market not to render a social service to us, but to earn his living by doing what he is good at. That is how the market works; sometimes its staunchest advocates even forget it!

Image Courtesy: http://www.citizensbookclub.com Caption: Rezaul Hoque

Image Courtesy: http://www.citizensbookclub.com
Caption: Rezaul Hoque

Free trade agreements are incomplete if it does no lead to reciprocal opening up of markets, which we seldom see when trade agreements took place between developed and less-developed countries. Labor markets of developed countries are still not fully open to LDCs. Non-tariff barriers are the tools that are frequently used by developed countries to bar less-developed countries’ goods.

Our policy makers will find policy making more difficult as these agreements demand that they take into account partner country’s concerns in formulating domestic policies. This is exactly the case with Taiwan. In a trade talk held between Taiwan and USA, USA expressed its concerns on Taiwan’s procurement process of medicines and medical equipments and their pricing.

Government did the right job by sticking to its earlier position about TICFA: not to sign it.

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From → Analysis

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