Desiree Sainthrope is a distinguished legal expert with extensive experience in drafting and analyzing international trade agreements. As a recognized authority in global compliance, she has spent decades navigating the intersection of intellectual property, emerging technologies like AI, and the complex legal frameworks that govern modern commerce. In this conversation, we explore the urgent need for trade policy reform in Bangladesh, focusing on how a high-tariff regime and protectionist dualism are impacting consumer welfare and long-term industrial growth.
Bangladesh’s average nominal tariff of 28% is significantly higher than the global average of 6%. How does this disparity specifically hinder the competitiveness of local manufacturers, and what metrics should the government track to ensure a successful transition toward international tariff standards?
The massive gap between Bangladesh’s 28% nominal tariff and the global average of 6% creates a “protectionist wall” that paradoxically weakens the very manufacturers it aims to shield. When domestic producers are insulated from global competition, they lose the incentive to innovate, leading to inefficiencies that make their products too expensive for international markets. To manage a transition, the government must track the “effective rate of protection” to see how much we are actually coddling industries, alongside the growth rate of non-garment exports. We also need to monitor the price delta between domestic and international consumer goods to ensure local manufacturers are becoming more productive rather than just relying on high barriers.
Since 2022, a 40% currency depreciation has combined with high para-tariffs to raise the effective import burden to roughly 55%. In what ways does this environment diminish consumer purchasing power, and what step-by-step measures can be taken to reduce the resulting $20 billion annual welfare loss?
The 40% depreciation of the currency has acted as a massive hidden tax, causing the price of imported essentials and raw materials to skyrocket. When you add para-tariffs into the mix—which have climbed from 2.6% in FY92 to a staggering 13.2% today—the effective burden of 55% makes everyday life significantly more expensive for the average citizen. To stop the $20 billion annual welfare loss, the state must first roll back these para-tariffs and rationalize duties on essential goods to lower the cost of living. Following that, we must move toward a more transparent exchange rate governance system that prevents sudden, violent swings in purchasing power.
A “dualism” currently exists where the garment sector operates under a duty-free regime while other industries face high protectionism. Why has this imbalance stalled the diversification of exports, and what specific incentives are needed to encourage non-garment sectors to compete on a global scale?
This “trade policy dualism” has essentially created a two-tier economy where the garment sector thrives in an open-market environment while other sectors are trapped in a protectionist bubble. Because non-garment industries are so heavily protected at home, they have little reason to brave the rigors of the global market, which is why our export basket remains so narrow. To break this, we need to extend duty-free input facilities to other promising sectors like electronics or leather, moving away from simple cash subsidies which have proven ineffective. We must replace blanket protection with performance-based incentives that reward firms for reaching specific export targets or quality benchmarks.
Import-substituting industries currently receive 28% nominal protection compared to a 7% subsidy for exporters. How does this anti-export bias discourage innovation within domestic firms, and what anecdotes from other emerging markets illustrate the dangers of maintaining permanent protection without performance-based conditions?
The current system provides a 28% “cushion” for firms selling locally, while exporters—who have to fight for every dollar—receive only a 7% subsidy, creating a massive anti-export bias. This structure tells a business owner that it is four times more profitable to stay small and protected at home than to innovate and scale globally. We have seen in various emerging markets that when protection becomes permanent rather than temporary, industries become “infants that never grow up,” eventually collapsing when forced to face real competition. Without time-bound conditions, these firms stop investing in new technology, leading to a stagnant industrial base that cannot survive without state support.
Effective trade reform often requires seamless coordination between revenue authorities and industrial ministries. Could you elaborate on how current institutional friction prevents the execution of long-term economic visions, and what structural changes would better align tax policies with the goal of attracting foreign direct investment?
There is a clear lack of coordination between the National Board of Revenue and the various ministries, where the need for immediate tax collection often sabotages long-term industrial growth. When revenue authorities prioritize high protective tariffs to meet short-term budget targets, they inadvertently drive away foreign investors who are looking for a predictable and open trading environment. We need a centralized economic council that aligns tax policy with investment goals, ensuring that the NBR’s actions don’t contradict the mission of attracting FDI. Structural changes should include a shift from high import taxes toward a broader internal tax base, which would make the country much more attractive to international partners.
As the country approaches LDC graduation, many long-standing protections will become unsustainable. What are the immediate risks for businesses that are unprepared for this shift, and how can the state facilitate a transition that prioritizes energy security and supply chain efficiency?
LDC graduation is a looming “reality check” because the special treatments and high barriers we currently enjoy will no longer be permitted under global trade rules. Businesses that have relied on high tariffs to survive will find themselves suddenly exposed to efficient international competitors, risking widespread closures if they don’t modernize now. The state can facilitate this by ensuring a stable and affordable energy supply, as high energy costs are currently a major bottleneck for industrial efficiency. Additionally, moving away from protectionism must be paired with massive investments in supply chain infrastructure to reduce the “hidden costs” that local businesses face at the ports and on the roads.
What is your forecast for Bangladesh’s trade policy reform?
I believe we are at a critical crossroads where the “hotchpotch” approach of being both inward and outward-looking must finally end in favor of a clear, export-led vision. While the transition will be painful for some protected industries, the $20 billion in consumer welfare losses and the stagnation of non-garment exports make reform an absolute necessity rather than a choice. If the government can successfully align revenue goals with industrial strategy and improve institutional execution, we will see a surge in diversification and a more resilient economy. However, if we continue to delay these reforms, the post-LDC graduation period could be characterized by significant economic volatility and a loss of global competitiveness.
