By Sadia Sultana Rimi:
In the current global economy, the US policy-making process has a significant impact on world trade, investment, and strategic management. In recent years, the US has been trying to expand its influence in the global market through the formulation of various economic and trade policies. One of these is the new dry policy and trade policy, which on the one hand is focused on protecting its own economic interests, and on the other hand, exerts influence on the world market.
The term “tight policy” generally refers to an economic policy in which a country’s government or central bank attempts to reduce liquidity in the market by shrinking the currency, limiting spending, or controlling credit rates. In the United States, the main objectives of this policy are to:
Inflation control: Reducing inflation by removing excess liquidity from the market.
Ensuring market stability: Reducing economic shocks and investment volatility.
Redirecting investment: Adopting a policy focused on investment in new technologies and advanced sectors.
This policy is leading to strategic changes in investment, trade, and financial flows in the United States, which will affect the country’s economic development in the long term.
The new US trade policy is designed to protect domestic industries and exports through trade regulations, tariffs and sanctions, and international agreements. Notable aspects include:
New Tariff Collection and Trade Rules: Tariffs on certain products have had to be changed to maintain a competitive position in the global market.
Trade Agreements and Mergers: Review and reform of new or existing trade agreements with various countries.
Technical Tariffs and Strategic Monitoring: Import restrictions have been imposed on certain products for technical and security reasons.
This policy has created a dilemma at the international level as well as opportunities for innovative change and investment in specific sectors.
Bangladesh has achieved significant economic growth in the past few decades. In addition to extensive investment and export growth in the developed garment industry, agriculture, and services sectors:
Export growth: Increased global demand for textile industry exports and other handmade products.
Foreign Investment: New horizons for economic development have been opened by increasing the attractiveness of international investors.
Monetary Policy Support: Bangladesh Bank and the government have taken various steps in an effort to control inflation and maintain financial stability.
The economic sector in Bangladesh still faces some fundamental challenges:
Insecurity and inadequate infrastructure: Infrastructure development and security issues in marginalized areas.
Labor and skill shortage: Adequate training and skill development are required for employment.
Complications in trade policy: Changes in international trade policymaking can lead to complications in exports and imports.
However, they are also creating some important opportunities for Bangladesh, such as new routes to international markets, technological advancements, and the creation of special economic zones.
The new US trade policy and trade policies may directly and indirectly affect Bangladesh’s exports and imports. Several aspects can be analyzed in this regard:
New tariffs and barriers: Increased tariffs on imports from the United States could increase the cost of exports from Bangladesh, which would hit the country’s garment and textile industries. At the same time, import restrictions on some products could negatively impact the Bangladeshi job market and manufacturing industries.
Technical standards and regulations: The implementation of high technical standards and policy changes in the United States may hinder market acceptance of Bangladeshi products in some cases. Bangladesh needs to improve relative to international standards to maintain the quality of its export products.
Finding new markets: On the other hand, changes in US policy may create new markets in some cases, which may be advantageous for some sectors in Bangladesh. For example, new demand may be created in alternative markets or the Mid-Western provinces, where opportunities may arise for Bangladeshi products.
Another important aspect of US policy is the change in foreign investment flows. This too could have the following impacts on Bangladesh:
Investment Redirection: Investors in the United States may change their investment strategies due to policy changes in their home markets. This could impact the amount of investment in Bangladesh, especially in the manufacturing and technology sectors.
Uncertainty in financial markets: Impacts on international currency markets and changes in exchange rates may require changes in Bangladesh Bank’s policies, which may impact inflation and economic stability.
Trade and Investment Cooperation: To enhance bilateral relations between the United States and Bangladesh, special investment agreements and cooperative policies may be necessary. This could lead to improved technology and pre-production systems, which will have a positive impact on the country’s economy in the long run.
US policies can have an impact not only on direct trade or investment, but also on technology and research. As a result:
Technology Transfer and Cooperation: Opportunities arise for the smooth transfer of advanced technology and cooperation in research and development, which can be helpful for increasing productivity and improving the manufacturing sector in Bangladesh.
New Innovation Policy: Strict US policies and technological controls can encourage Bangladesh’s young innovators and startup sector to embrace new ideas, so that they can improve themselves to international standards.
Energy and Environmental Technology Investment: US policy emphasizes energy and environmental protection, renewable energy, and technology investment. As a result, investment opportunities in this sector in Bangladesh may increase, which will be helpful for the country’s long-term development.
The textile and garment industry is one of the mainstays of Bangladesh’s economy. The impact of US policy on this sector can be seen in the following aspects:
Export Competition: Changes in US tariffs and customs policies may increase the level of competition in the international market. As a result, the Bangladeshi garment industry will have to take new innovative steps in quality and design.
Market Divergence: Due to changing policies in the United States, demand for some products and designs may decrease, which will prompt Bangladesh to find alternative markets.
Production costs and technology: To reach international standards, the application of modern technology, automated machinery, and efficient techniques in production will become essential.
Although the direct impact of the United States on agriculture and food processing is relatively small, indirect impacts can occur:
Change in import dependence: If US policy increases tariffs on imports, the cost of importing some raw materials in Bangladesh may increase.
Trade and Market Growth: The application of international standards and technologies in food processing and other processes can be encouraged, which will help increase the country’s agricultural production and exports.
Access to international markets: While US policies may create a regulatory environment in some areas of technology and other services, it is possible to increase competition in this sector by implementing domestic policies and investments in Bangladesh.
Investment and Innovation: The US’s innovative policies in the service sector, especially in information technology, software development, and digital banking, will also increase technological investment in Bangladesh.
The impact of the new US policies will also be clearly seen in the financial sector:
Foreign investment flows: Changing investment policies in the United States may impact the investment strategies of foreign investors, resulting in fluctuations in the amount of investment in Bangladesh.
Monetary policy and banking system: Exchange rate, inflation control and banking regulations may need to be adjusted in the new context. Appropriate measures are essential to maintain transparency and stability in the government’s economic policies.
When policy changes may lead to investment risks and economic instability, policymakers in Bangladesh should consider the following:
Risk assessment and management: Anticipating and taking appropriate measures to mitigate risks arising from the impact of international policies, such as inflation, exchange rate fluctuations, and tariff changes.
Short-term and long-term planning: Adopting long-term strategic plans to not only deal with the current situation, but also to assess potential future risks and opportunities.
In the context of the change in US policy, Bangladesh should take timely steps to ensure that the country’s economy remains secure and thriving. The following recommendations may be considered:
Quality Improvement: By increasing productivity and quality standards by following international standards, Bangladesh will be able to survive in international competition. This requires introducing modern technology and training programs, especially in the garment and textile sectors.
Market diversification: Emphasis should be placed on exploring new markets and achieving diversification, especially through technological cooperation, to reduce dependence on a single market and create new designs, products, and new needs.
Improved infrastructure: Infrastructure development and modernization are essential as a key driver of economic development. Investors’ confidence must be increased by improving roads, ports, electricity, and communication infrastructure.
Tax and Investment Certification System: To make Bangladesh more attractive to international investors, it is necessary to provide transparency and convenience in tax policies and investment certification.
Fintech and digitalization: The use of advanced technology in the banking and finance sector, the expansion of digital transactions, and the facilitation of financial services must be promoted.
Multilateral agreements and partnerships: To increase participation in global trade, cooperative agreements and investment policies must be developed with other major economic countries, including the United States.
Monitoring and Review: Monitoring policy and market conditions by regularly maintaining contact with the international advisory community and institutions in the context of changing policies in the field of international trade and investment.
Strategies to increase self-reliance: Emphasis can be placed on reducing economic shocks from foreign policy impacts and increasing self-reliance through the development of the country’s domestic production and industrial sectors.
Some of the notable benefits resulting from the implementation of the new US policy include:
Technological and innovative improvements: Modern technology, training, and research opportunities will increase in Bangladesh’s industrial and service sectors to reach international standards.
Foreign investment flow: Foreign investors can be attracted to the country’s economy through transparent and well-thought-out investment policies and infrastructure development.
Market diversification: New international agreements and cooperation also create the potential for market diversification in the export sector, which will help in the country’s financial stability.
Market volatility: Changes in US policy may lead to tariff increases, sanctions, or trade barriers in the international market, which could negatively impact Bangladesh’s export sector.
Bangladesh may face a difficult time in the context of the United States’ new austerity and trade policies, but through the right policies, strategies, and international cooperation, it is possible to limit its negative impact and further accelerate the country’s economic development.
Sadia Sultana Rimi is a Student, Mathematics Department,
Jagannath University, Dhaka