Bangladesh and Japan set to forge economic partnership agreement: Navigating trade challenges and opportunities

Bangladesh and Japan are initiating discussions on an economic partnership agreement (EPA) focusing on tariff negotiations and fostering trade relations between both the countries.

Bangladesh and Japan are set to commence discussions on an economic partnership agreement (EPA) by the end of the month, aiming to finalize the agreement in 2025, according to sources from Nikkei. With Japan being a significant importer of textiles from Bangladesh and several Japanese enterprises investing in the South Asian country, the EPA is seen as a strategic move. However, as Bangladesh is expected to be removed from the United Nations’ “least-developed countries” list in 2026, losing tariff exemptions on exports to developed nations, the agreement is crucial in mitigating the impact on Bangladesh’s exports to Japan.

The EPA negotiations will likely address Japan’s desire for Bangladesh to reduce tariffs on imported steel and automobiles, especially as Bangladesh’s economy grows rapidly and infrastructure demand increases. Tariffs on these products are currently around 10% and 25%, respectively. In return, Japan aims to negotiate tariffs on rice and Japanese beef (Wagyu), aiming to boost its agricultural product exports.

Japan, which imported approximately $1.72 billion worth of goods from Bangladesh in 2022, primarily apparel, hopes the EPA will maintain favourable trade conditions. Bangladesh’s exports to Japan reached around $2.57 billion, with iron and steel constituting about 30% of Japan’s exports to Bangladesh.

The significance of the EPA is underscored by the presence of 338 Japanese companies in Bangladesh as of May 2023, doubling over a decade, according to Japan External Trade Organization research. These companies could face challenges if tariffs rise abruptly after Bangladesh loses its “least-developed country” status, particularly impacting textile exports.

Notably, this marks Japan’s first EPA negotiation with a country on the verge of losing its “least-developed” status. The discussions, initiated after research by both governments in December 2022, are expected to strengthen political and diplomatic ties while fostering expanded trade and investment. Japan also sees an opportunity to establish tariff and trade rule standards as Bangladesh explores a free trade agreement with China.

Besides tariff negotiations, the EPA talks will address streamlining paperwork and other procedures related to importing and exporting. As Bangladesh and Japan navigate this economic partnership, the outcome of the negotiations is anticipated to shape their trade relations, providing a model for future agreements in the evolving landscape of global commerce.