Bangladesh's protectionist policies doing more harm than good: Zaidi Sattar

For years, I have been saying that Bangladesh's protectionist economic policies are doing more harm than good. Our excessive tariffs are restricting our export potential and making trade negotiations more difficult. In the upcoming budget, we must take decisive action and reduce tariffs by at least 15–20% to mitigate these issues.

At present, our economy is heavily reliant on protectionist policies, which prevent us from expanding our exports beyond the garment sector. Our neighbouring countries have significantly lower tariff rates, allowing them to remain competitive in global trade, whereas our high tariffs continue to hold us back. Our tariff rates have risen by 40% in just the last two years. This increase is unjustifiable and is making our exports even less viable.

One of the most damaging consequences of these high tariffs is the rampant corruption they encourage. When importers face excessive duties, they often seek ways to evade them rather than pay the full amount. The higher the tariffs, the greater the tendency for corruption. If we want to curb tax evasion, the logical step is to lower these duties. 

Consider a simple scenario: If an importer brings in goods worth Tk100, and tariffs inflate the price to Tk140, there is a natural incentive to hide or underreport the import to avoid paying such a high cost. 

This is not an untested idea. In the 1990s, we gradually reduced tariffs from an average of 79% to 45% over five years, yet the government did not suffer any revenue loss. If it worked then, why wouldn't it work now? Of course, I recognise that the current economic circumstances may not allow for such a drastic cut, but some reduction is absolutely necessary.

Our trade relations with the United States further highlight the problem. The US calculates our tax on their exports at 74%, while we estimate it at 64%, with the discrepancy arising from non-tariff barriers. In response, they have imposed a 37% duty on our exports. While we do tax certain imports from the US, key commodities such as cotton, metal and scrap materials only face a minimal 1.5% duty. 

However, our tariffs on other goods — particularly cars and alcoholic beverages — are excessively high, with some vehicle imports facing duties exceeding 500%.

I understand that high tariffs on alcohol are meant to discourage consumption, but the extreme taxation on certain vehicles is simply excessive. These policies are not benefiting our economy; rather, they are restricting market access and limiting growth.

The reality is that Bangladesh does not have the market power to impose its trade conditions on the US or other major economies. We must negotiate smarter and manage our trade policies in a way that strengthens our position rather than weakens it. Lowering tariffs is not just about reducing costs — it is about making Bangladesh a stronger and more competitive player in the global economy.

TBS' Anonno Afroz spoke to Dr Zaidi Sattar over the phone