Trade Finance USA and Bangladesh Essay

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The United States is the #1 export partner for Bangladesh, representing 13.9% of Bangladesh's exports. However, the US is not one of the countries from which Bangladesh primarily imports (CIA World Factbook, 2017). The total trade between the two countries in 2016 was around $6.8 billion, $5.9 billion of which was from Bangladesh to the US. Imports of American goods to Bangladesh totalled just $895 million. Bangladesh is thus the 50th-largest trade partner of the US (USTR, 2017).

Bangladesh exports are woven apparel ($3.8 billion), knit apparel ($1.4 billion), other textiles ($206 million) and footwear ($105 million). The US exports to Bangladesh soybeans ($232 million), cotton ($95 million), corn ($39 million) and feed/fodder ($22 million). Thus, the Bangladesh has a position as one of the clothing and footwear-producing nations exporting to the US, but really only has the means to import small amounts of agricultural goods. Trade with Bangladesh is estimated to support around 6000 American jobs (USTR, 2017).

Financing Trade

There are several critical issues with respect to financing trade between the US and Bangladesh. The Bangladeshi trade finance market is underdeveloped, but it is also beset with significant corruption and a poor legal environment. The Heritage Foundation scores Bangladesh 55.0, ranking 128th in the world, on the Economic Freedom Index (Heritage.

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org, 2017). Several key issues were highlighted in this analysis.

One key issue was government integrity, where Bangladesh scored very poorly. This score covers issues like corruption and government control – its basic legitimacy. Transparency International (2016) scores Bangladesh a 26, good for 145th out of 176 countries studied. The Fund for Peace's Fragile States Index, which evaluates the stability and legitimacy of the regimes ruling a country places Bangladesh 89.1, or the 37th-weakest state in the world (FFP, 2017), though apparently this is a marked improvement from where the country was a decade ago. The state's legitimacy is weaker than it has been in the past, however, despite improvements in other areas. That said, with most trade concentrated in Dhaka and that city being the most secure area of the country, the lack of financial infrastructure and rampant corruption stand as the biggest issues, with question marks about the rule of law also being an issue.

There is limited competition for trade finance, with HSBC being the only major international institution with substantial investment throughout the country, and that leads to a chronic shortfall of trade finance in the country (Rahman, 2016). HSBC's optimism is one sign that.....

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