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Is trade an automatic stabilizer for Bangladesh’s economy?

Abul Basher's picture

The global economic downturn and the consequent pessimistic outlook for exports in developing countries like Bangladesh have reinvigorated voices for protectionism. Even pro-trade minds have vented their skepticism about trade liberalization, as if the punch of the ongoing crisis could be shielded with the help of an embargo on trade with the rest of the world!

Such thoughts, derived from the gloomy prospects of exports, ignore the potential benefits drawn through the imports and disregard the lessons learned from history- that economic isolation leads to further impoverishment.

It’s true that the global economic downturn has reduced the demand for our exports in the developed world, as a result their prices have gone down. But the same is true for our imports as well. The obvious example is petroleum. The sky-high petroleum price has decreased since the beginning of the global economic crisis, which has helped oil importing countries like Bangladesh. In fact, it is because of the reduction of petroleum price in the global market, that the Government of Bangladesh can increase subsidies on petroleum and fertilizer.

When global economy stumbles, global demand for goods goes down as well. Consequently, commodity prices go down. Thus depending on the type of the commodity, trade can act as an automatic trade balance stabilizer leaving no serious economic problem in the external balance of the country, contrary to what has been argued by many in the recent days.

Due of the openness of the economy that allows both imports and exports to respond to any types of external shock, the balance of trade has not deteriorated because of the economic crisis. Rather, a significant improvement was observed with growth in the gap of trade decreasing by 28.4% between July 2007 and January 2009.

Thus the openness of Bangladesh economy has played the role of not only an automatic stabilizer but an automatic reducer of the trade gap during this crisis, thanks to the progress made so far towards trade liberalization. What do you think could be done to further reduce this trade gap?

Comments

thanks I had a question to you as you are very optimistic of trade liberalization policy. so thus fur it helped to promote GDP but in the long run what could happen about manufacturing industry as well as women employment. I want to see some hope and how it can be true?

Submitted by Anonymous on
1. About Trade liberalization policy: Bangladesh need a more careful approach as trade liberalization has already provided evidences that it can promote advantages out of the comparative disadvantages for many but not the entire. 2. The future of manufacturing industry: Although the anxiety among the entrepreneurs, policy makers and economists is still very high; on the contrary, the clothing sector has remained more or less unscratched by the global crisis. Still Bangladesh is low end of the RMG market; there is no room for export cynicism country like Bangladesh. Bangladesh not only survived but even expanded its market share by paying proper attention to market trends. 3. Women employment context: There is ambiguity about trade Liberalization and Feminization of labor force. In fact discriminatory forces underpin a huge influx of women's emergence in the informal sector, which feminized the labor force. Just after phasing out of MFA women workers suffered the most. The percentage of women workers shockingly came down form 90% to around 65%. But in 2007, participation rate had been increased among the female garment workers, which was 85%. So, there is some hope for manufacturing industry and women employment if gender based strategies are taken into consideration along with suitable market based strategies focusing on the shortening the lead time, duty-free imports, improved infrastructure, training for workers, compliance standards, production incentives, quality and cost competitiveness.

Submitted by Anonymous on
1. About Trade liberalization policy: Bangladesh need a more careful approach as trade liberalization has already provided evidences that it can promote advantages out of the comparative disadvantages for many but not the entire. 2. The future of manufacturing industry: Although the anxiety among the entrepreneurs, policy makers and economists is still very high; on the contrary, the clothing sector has remained more or less unscratched by the global crisis. Still Bangladesh is low end of the RMG market; there is no room for export cynicism country like Bangladesh. Bangladesh not only survived but even expanded its market share by paying proper attention to market trends. 3. Women employment context: There is ambiguity about trade Liberalization and Feminization of labor force. In fact discriminatory forces underpin a huge influx of women's emergence in the informal sector, which feminized the labor force. Just after phasing out of MFA women workers suffered the most. The percentage of women workers shockingly came down form 90% to around 65%. But in 2007, participation rate had been increased among the female garment workers, which was 85%. So, there is some hope for manufacturing industry and women employment if gender based strategies are taken into consideration along with suitable market based strategies focusing on the shortening the lead time, duty-free imports, improved infrastructure, training for workers, compliance standards, production incentives, quality and cost competitiveness.

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