Recently, Bangladesh formally proposed the signing of a Free Trade Agreement (FTA) with the Eurasian Economic Union (EAEU). The EAEU comprises five countries—Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan—with whom Bangladesh has a combined trade volume of over USD 1.5 billion, something that has the potential to increase manifold if an FTA is inked. A feasibility test was also conducted by the planning ministry to support the speculations over the signing of the FTA and also its potential—which has appeared to yield fruitful outcomes. All these efforts were made to support Bangladesh's preparation for its change of socio-economic status—that is, graduating from the Least Developed Country (LDC) grouping to the Developing Countries category.

During the 76th session of the UN General Assembly (UNGA), Bangladesh received the go-ahead for this graduation, which is scheduled to be effective in 2026. Earlier in February 2021, the United Nations Committee for Development Policy (UNCDP) recommended Bangladesh to graduate as it had acquired eligibility across all three criteria for graduation—per capita income, human assets index (HAI), and economic and environmental vulnerability index (EVI).This is an outstanding accomplishment which coincides with the golden jubilee of Bangladesh's independence. However, it also forces us to confront a number of challenges that need to be overcome by pursuing a comprehensive trade strategy for a smooth graduation and sustainability in holding on to our new status.

A country exiting the LDC category is supposed to lose international support measures (ISM), including preferential market access and special treatment by the World Trade Organization (WTO) in terms of bilateral and regional trade. This means that Bangladesh would have to relinquish its existing privileges, such as duty-free quota-free (DFQF) access to the export markets, for which we will most likely meet unfavourable ramifications. According to Debapriya Bhattacharya, a member of the UNCDP and a distinguished fellow of the Centre for Policy Dialogue (CPD), Bangladesh may experience shortfalls equivalent to 8-10 percent of its gross export revenue due to its loss of the DFQF provision—amounting to about USD 2.5 billion annually.

Bangladesh will also lose the advantage of a Generalised System of Preferences (GSP) under the WTO. As an LDC, Bangladesh enjoyed the privilege of the Trade-Related Intellectual Property Rights (TRIPS) waiver, which contributes enormously to the progression of the country's pharmaceutical industry. The waiver for patent authorisation will be curtailed once the country graduates. Moreover, Bangladesh will lose its eligibility for accessing grants and soft loans under official development assistance (ODA).

Bangladesh might also effectively succumb to the "Dutch disease," due to its heavy economic dependence on the RMG sector. So, to prevent this aftermath of the graduation, Bangladesh will have to craft a host of comprehensive approaches: keep signing more FTAs and PTAs, explore more diversified markets, and not put all its eggs in one basket.

Beyond existing trade-related relational mechanisms, Bangladesh needs to prepare an extensive overseas market strategy, exploring diverse markets across different regions. Joining other trade blocs and signing bilateral and multilateral FTAs will mitigate trade-related complications such as tariffs, quotas, subsidies, or prohibitions, and facilitate further trade relations and expansion. It is also crucial for Bangladesh to diversify its export basket with leather goods, frozen food, etc.

So far, Bangladesh has only inked a bilateral PTA with Bhutan on December 6, 2020 and is considering signing more PTAs with several countries including India, Indonesia, Malaysia, and Sri Lanka. In order to substitute the soon-to-be-gone privileges, the current FTA domain must be expanded to engage as many countries as possible.

Given Bangladesh's lucrativeness as an emerging economic power within the Saarc trade bloc and its 165-million-people market, an FTA with Bangladesh will potentially be a stepping stone for Russian and other EAEU businesses and investors to have access to other South Asian markets. And most importantly, with its unique geographical position and easy accessibility to global maritime trade routes, Bangladesh could work as a central trade and manufacturing hub for South Asia and beyond. Thus, an FTA between Bangladesh and the EAEU could be a mutual win for both parties, meaningful progress and prosperity for the people in both regions, and for the world as a whole.

Farzana Zaman is a freelance writer.