Costs of LDC graduation on market access: evidence from emerging Bangladesh

Abstract

We empirically estimate the costs of LDC graduation on market access for Bangladesh using a computable general equilibrium modelling framework. If developed countries impose standard generalized system of preferences (GSP) tariffs while importing from Bangladesh and at the same time Bangladesh eliminates its export subsidies, our modelling suggests that real gross domestic product (GDP) may drop by about 0.38 per cent and exports could fall by about six percent for Bangladesh. The ready-made garment sector could be affected severely, with results suggesting exports could decline by about 14 per cent. Our analysis indicates that the income of urban households could decrease by three per cent, and household consumption may shrink by about four per cent. To minimize these potentially adverse impacts, Bangladesh should aim to ensure market access continues through signing preferential trade agreements. In addition, streamlined subsidy policies, enhanced domestic productivity, export diversification, and increased foreign investment, are likely to be important areas of focus for a smooth LDC graduation.