Navigating LDC graduation: modelling the impact of RCEP and CPTPP on Bangladesh

Abstract

Bangladesh will graduate from the LDC list by 2026. Currently, Bangladesh's exports of readymade garments (RMG) benefit from international support measures which allow preferential trade in major export destinations, such as the EU. After graduation, Bangladesh's exports, particularly RMG, will face competition from mega trading blocs, such as RCEP and CPTPP. This article employs the GTAP model to estimate the impact of Bangladesh's graduation from the LDC category and how mega FTAs are likely to affect Bangladesh's exports and potential welfare. The model also considers the scenarios of either United States or the UK or both joining the CPTPP. The model results show that Bangladesh's graduation will lead to a fall in GDP and RMG exports by 1.53% and 11.8%, respectively. The negative impact is magnified when we factor in the mega-trading blocs. Further negative impacts are observed when either United States or the UK or both join the CPTPP.