Should Bangladesh join Regional Comprehensive Economic Partnership (RCEP)? The gravity explanation of Bangladesh dilemma

Abstract

PurposeThe scope of this work is to explore whether Regional Comprehensive Economic Partnership (RCEP) would be beneficial to Bangladesh, given Bangladesh's strong ties with India and the west.Design/methodology/approachUsing extended gravity equation and data from Head and Mayer (2021) and the Direction of Trade Statistic (IMF, 2021) for Bangladesh with its applicable partner countries from 1972 till 2019, the authors attempted to examine the potential impact of joining RCEP while keeping its relationship with South Asian Association for Regional Cooperation (SAARC), and other existing economic integration schemes intact.FindingsUsing traditional pooled ordinary least squares, two-stage least square and generalized method of moment techniques, it has been revealed that conventional partners in the South led by India are still beneficial to Bangladeshs trading line. Joining RCEP provides ample avenues for trade expansion without replacing the positive effects of SAARC.Practical implicationsTraditional partners from European, American and South Asian trading opportunities are still paying enough dividends to Bangladesh. RCEP is providing a trade-enhancing chance for Bangladesh in the eastern direction. This paper provides a policy suggestion to look east policy of government. A total overhaul of her tax structure through minimizing excessive reliance on import tariff revenue is desired to facilitate her to join RCEP in the future because most of its prospective RCEP partners are import partners.Originality/valueThis is the first and the only study which explores the feasibility of Bangladesh to join the RCEP by using the most recently updated gravity data in a panel framework.HighlightsSince its inception on November 15, 2020, Regional Comprehensive Economic Partnership (RCEP) has emerged as one of the largest economic integration areas in the world.As a borderline country between South Asia and RCEP, Bangladesh is in a fix to take a decision either to join or not to join RCEP if they are invited.This paper used the gravity equation in an extended form by taking Bangladesh with its 197 trading partners’ trade data for 1972–2019.The findings postulate that the existing relationship with SAARC countries is still beneficial to its welfare, and RCEP is also economically helpful in enhancing its trade.

Influence of international industrial transfer on the structural power of global value chain -Empirical evidence from manufacturing in RCEP Countries

“…This paper also uses the geometric average method to recalculate the structural power of value-added and replace the original dependent variable. The estimated coefficients and statistical significance tests of the core explanatory variables and other control variables maintain a high logical consistency with the benchmark regression results in Table (3), which verifies that the benchmark regression results are reliable and robust.…”

“…The entry into force of RCEP means that, in the current international environment where anti-globalization and trade protectionism prevail in European and American countries, regional integration in eastern Asia has been strengthened. Additionally, even the degree of trade openness and facilitation in eastern Asia has been further improved, which is of great significance for stabilizing regional industrial supply chains, promoting regional value chain integration, better coping with the risk of chain break in developed countries, and promoting regional and world economic development [ 3 ]. However, the internal economic development levels of RCEP member countries are uneven, including highly developed countries, developing countries and underdeveloped countries.…”

Why did India Pull Out of Regional Comprehensive Economic Partnership (RCEP)? A Gravity Explanation of the Indian Puzzle

“…Furthermore, it does not require set-up cost and can be run using simple statistical software 41) . Fixed Effects (FE) and Random effects (RE) estimates fail to capture time-invariant variables like common language, common border and trade that we have analyzed in our model 34) .…”

“…If Pakistan joins RCEP, export and import patterns will be similar and investment will increase. A thorough analysis was undertaken to investigate the benefit of Bangladesh from joining RCEP 34) . The study adapted the gravity equation of Feenstra to address multilateral resistance and used one period lag in their model 35) .…”