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Trade issues and India

Financial Express, Bangladesh

Trade issues and India

By Amin Ahmed Chowdhury

20 March 2006

THE last meeting of the Indo-Bangladesh Joint Economic Commission discussed the formation of a free trade area (FTA) between the two countries. The FTA offer was made earlier by India. Bangladesh has only scrutinised different aspects of the proposal so far.

Negotiations to launch the FTA will start in October and on their successful outcome will depend its ultimate formation . Bangladesh has consented to the FTA in principle reserving the right to engage in hard bargaining with its neighbour over the issue. Indeed, the benefits of free trading for Bangladesh is seen as crucially linked to how efficiently it negotiates such a deal with India. India already has free trading arrangements with some of its other neighbours. Sri Lanka, for example, signed an FTA agreement with India and this led to substantial increases of Sri Lankan exports to India and notably increased foreign investments in that country as well. Reportedly, Sri Lanka’s export to India rose by 137 per cent following its FTA arrangement with India. Thus, Bangladesh may look forward to having a similar FTA with India which would promote its best economic interests. It can carefully study the India-Sri Lanka FTA as a guide in this respect.

Stereotype notions exist about expanding Indo-Bangladesh trade. These relate to the weaker position of Bangladesh’s indigenous industries and how far these would be able to cope with the pressure that freer entry of Indian goods could create for them. But it needs to be realised that Indo-Bangladesh free trading would not mean wholesale free access of all kinds of Indian goods at initial stages into the Bangladesh market. Only a limited number of goods the number and list of which are to be negotiated, will gain such free access on both sides. Thus, the fear of Indian goods on a large scale flooding the market of Bangladesh all on a sudden and crippling local enterprising is not a realistic one, at least not under the present proposed framework of the FTA.

Besides, the business community in Bangladesh has generally welcomed the FTA idea considering it as an opportunity to expand the country’s export activities.
In the present situation, India enjoys one sided huge advantage in its formal and informal trade with Bangladesh. With an FTA in place, this picture could change considerably with Bangladeshi export products reaching Indian markets in significantly increased number and volumes limiting to some extent the one-sided exploitation of advantage by India in the bilateral trade.

However, India must assure Bangladesh practically about not only signing but actually carrying out its commitments sincerely under an FTA arrangement.
Previously, India declared some concessions in relation to the entry of some Bangladeshi products into their market. But the concessions were not practically honoured. India continues to apply non-tariff barriers in relation to these and other goods from Bangladesh. It even applied the anti-dumping law very unreasonably against the export of limited quantities of batteries from Bangladesh when the trade balance between the two countries remains so overwhelmingly in its favour. Thus, it is very important that Indian authorities should start honouring their commitments immediately to create confidence ahead of the start of talks on the FTA .