Bilateral Trade Deficit of Bangladesh with China, India, Pakistan and Singapore

Abstract

From the very beginning, China, India, Pakistan and Singapore have been major and significant partners of Bangladesh both economically and politically. Unfortunately, it is recently estimated that Bangladesh has highest trade deficit of total $6.8 billion with China, 2nd highest of $5.579 billion with India, 3rd highest trade deficit of $1.5 billion with Singapore (June, 2017, The Independent News) which is indeed a matter of concern. Being a neighbor country, the trade deficit of Bangladesh with Pakistan also must be taken into account. Thus, this research paper attempts to review the pattern of trade deficit of Bangladesh with the mentioned countries empirically and also to find out the reasons behind such trade deficit, long run equilibrium relationship, gaps to be refilled, and ways to diminish such trade imbalance. With this research it is found that the simultaneous increase in countries’ GDP per capita will actually work in reverse way for Bangladesh trade balance. Moreover, favorable impact of foreign direct investment, Most Favored Nations Dutiable imports, and unfavorable impact of depreciating national exchange rate against foreign currency, labor force participation ratio, and trade deficit of Bangladesh with rest of the world have been found. Along with several limitations, long panel data (T>N) and feasible generalized least square model, unit root test, have been conducted to carry out this research paper and secondary source (internet), World Bank database, WITS (World Integrated Trade Solution) database, newspapers and articles have been used for data collection and information. Sample size of our research is 14 years (from FY 2000 to FY 2013).From the very beginning, China, India, Pakistan and Singapore have been major and significant partners of Bangladesh both economically and politically. Unfortunately, it is recently estimated that Bangladesh has highest trade deficit of total $6.8 billion with China, 2nd highest of $5.579 billion with India, 3rd highest trade deficit of $1.5 billion with Singapore (June, 2017, The Independent News) which is indeed a matter of concern. Being a neighbor country, the trade deficit of Bangladesh with Pakistan also must be taken into account. Thus, this research paper attempts to review the pattern of trade deficit of Bangladesh with the mentioned countries empirically and also to find out the reasons behind such trade deficit, long run equilibrium relationship, gaps to be refilled, and ways to diminish such trade imbalance. With this research it is found that the simultaneous increase in countries’ GDP per capita will actually work in reverse way for Bangladesh trade balance. Moreover, favorable impact of foreign direct investment, Most Favored Nations Dutiable imports, and unfavorable impact of depreciating national exchange rate against foreign currency, labor force participation ratio, and trade deficit of Bangladesh with rest of the world have been found. Along with several limitations, long panel data (T>N) and feasible generalized least square model, unit root test, have been conducted to carry out this research paper and secondary source (internet), World Bank database, WITS (World Integrated Trade Solution) database, newspapers and articles have been used for data collection and information. Sample size of our research is 14 years (from FY 2000 to FY 2013).