Liberalizing Bangladesh's Services Trade: Is Joining Trade in Services Agreement the Way to Go?. Issue 1 (March 2020)

• Record Type: Journal Article
• Authors: Jansen Van Rensburg, Susara J.; Rossouw, Riaan; Viviers, Wilma
• Is Part Of: South Asia economic journal. Volume 21:Issue 1(2020)
• Page Start: 99
• Page End: 121
• Publication Date: 2020-03
• Subjects: Bangladesh -- computable general equilibrium modelling -- trade liberalization -- trade in services -- trade in services agreement; South Asia -- Economic conditions -- Periodicals; South Asia -- Economic policy -- Periodicals; Periodicals; 330.95405
• DOI: 10.1177/1391561420903198
• Languages: English
• ISSNs: 1391-5614

Abstract

Although currently limited, services trade holds great potential for Bangladesh, as services already make a major contribution to GDP and employment. Services represent an important alternative (in the longer term) or complement (in the shorter term) to ready-made garments (RMGs), which have long dominated Bangladesh's export mix. The country is poised to see declining RMG export revenues when the country graduates out of least developed country (LDC) status and loses its trade preferences in global markets. To build domestic capacity with a view to developing its services export sector, Bangladesh needs to open its market to services imports. But what approach would be best? Can a plurilateral trade agreement (PTA) like the Trade in Services Agreement (TiSA), whose members have sought to stimulate their services sectors through more liberalized trade, ever be an option? We use a dynamic computable general equilibrium (CGE) model to simulate the effects of TiSA membership on Bangladesh's economy. The results show that, overall, Bangladesh would derive marginal benefit from TiSA, but employment and exports would suffer. The worst-affected sectors would be agriculture and textiles and clothing, the country's largest employers. To lessen the impact of increased foreign competition, a regional trade approach is recommended, supported by a sound national services strategy which would include a roadmap for tackling the country's myriad supply-side shortcomings. JEL: F13, F14, F15, F16