TRADE POLICY REFORMS: BANGLADESH’S EXPERIENCE

This article provides an overview and analysis of Bangladesh's experience with trade policy reforms, primarily undertaken since the early 1990s. It traces the country's shift from a highly protectionist, import-substituting industrialization strategy to a more open, export-oriented model. The study examines the key components of the reform program, including the reduction of tariffs, the dismantling of quantitative restrictions on imports, and the simplification of trade procedures. The research assesses the impact of these reforms on the Bangladeshi economy. It highlights the phenomenal growth of the ready-made garment (RPMG) export sector as the most significant positive outcome. However, the paper also provides a balanced analysis, exploring the challenges that have accompanied liberalization, such as the increased competitive pressure on domestic industries and the persistent trade deficit. The analysis concludes by discussing the "second generation" of trade policy reforms needed to enhance competitiveness and to diversify the country's export base.

The trade policy reforms initiated in the early 1990s marked a watershed moment in the economic history of Bangladesh. This paper provides a comprehensive review of this experience. The study begins by detailing the key features of the reform agenda, which represented a decisive move away from the inward-looking policies of the past. It provides data on the substantial reductions in average tariff rates and the elimination of most non-tariff barriers, which significantly opened up the Bangladeshi economy to international trade. The core of the article is an assessment of the impacts of these reforms. The most spectacular success story analyzed is the export-oriented RMG sector, which flourished in the new liberalized environment and became the engine of the country's economic growth and a major source of employment, particularly for women. The paper argues that this is a classic case of a country successfully exploiting its comparative advantage. The second part of the study offers a more critical perspective. It examines the significant adjustment costs of the reforms, particularly the difficulties faced by older, import-substituting industries that were unable to compete with cheaper imports. It also analyzes the failure of the reforms to stimulate a significant diversification of the export basket, leaving the economy highly dependent on the single sector of RMGs. The paper concludes that while the first generation of trade policy reforms was largely successful, the next phase of Bangladesh's development would require a new, more sophisticated set of "second generation" reforms focused on improving productivity, building domestic supply chains, and fostering new export sectors.