International Trade: Patterns and Prospects

Abstract

Bangladesh has come a long way in terms of trade. The problems associated with import substitution policies that Bangladesh adopted in early years were soon very apparent. This prompted a change in trade policy and the government soon started to liberalize trade and promote exports. Over the years, several financial incentives were provided to change the business climate. This included the establishment of several export processing zones (EPZ) to attract Foreign Direct Investment (FDI), export subsidies, and privatization of several state-owned enterprises. The export composition has also changed from primary commodities to manufacturing goods. The share of industrial raw materials, capital machinery, and intermediate goods started to increase as a part of total imports and contributed significantly in the production of goods that were consumed domestically and were also exported in other countries. The change in policy helped Bangladesh to allocate resources more efficiently, increase GDP at a faster rate, and consequently reduce poverty. Creation of EPZ helped to attract FDI, increase foreign exchange earnings, create employment, and transfer new technologies and skills. Some significant progress has been made in terms of rationalization of tariffs and elimination of quantitative restrictions. However, the protection level is still very high compared to many neighboring countries and improvement in the business climate is needed in order to promote trade that can support robust growth. The aim of this article is to provide a brief description of current export and import patterns in Bangladesh and discuss few areas that can affect the future.