The Emerging New Trade Alliance Scenario: Why the LDCs Should be Concerned

The recent emergence of mega-RTAs could signi­ficantly undermine LDCs’ export to the larger economies (Palit, 2015). The traditional Quad members, namely European Union (EU), the United States (US), Canada, and Japan, along with several other advanced economies and large developing countries, are the key players in the evolving mega regional trade agreements (mega-RTAs). These countries have traditionally provided preferential market access to the LDCs through the Generalized System of Preferences (GSP) schemes as well as unilateral and preferential tariff preferences. Elimination of import tariffs on a wide range of items among the participating countries in the mega-RTAs may result in LDCs facing comparatively higher tariffs on their exports while similar export items from the RTA participants are likely to enjoy reduced or duty-free and quota-free (DF-QF) market access. Since the LDCs lack diversi­fication in their exports, the adverse implications of preference erosion are likely to be highly significant both in terms of exports as also the overall economy. It may be noted that a number of participating countries in mega-RTAs are also major export destinations for many LDCs. For example, the US and EU are major destinations for ready-made garment (RMG) exports from Bangladesh and Cambodia. The emerging situation is all the more challenging also because LDCs, by and large, have tended to remain outside the ambit of mega regional negotiations till now.