WB study on FTA with India
Financial Express, Dhaka, 16 August 2005
Editorial
WB study on FTA with India
A debate over the pros and cons of signing a free trade agreement (FTA) with neighbouring India has been going on for quite sometime. India is keen on signing one as early as possible but Bangladesh has been rather sceptical about the outcome of such a deal because of the former’s alleged protectionist attitude. Protagonists of the FTA have, however, found Bangladesh to be unnecessarily oversensitive. But the findings of a World Bank (WB) study that were made available at a workshop held a couple of days back in Dhaka have, actually, confirmed Bangladesh’s worries. The study in question also pointed out the hard realities relating to trade prospects between Bangladesh and India and the Dhaka’s capacity to effectively penetrate the huge Indian market. It said the current import regime of India holds out little prospect for Bangladesh to raise its level of exports to under any form of free trade deal--- bilateral or multilateral--- with the latter. While dismissing Bangladesh’s allegation that non-tariff and bureaucratic barriers put by India are constraining Bangladesh exports to India, the study has pointed out an unpalatable truth--- Bangladesh’s lack of comparative advantage so far as its exports to India are concerned.
The observation of the WB study about the comparative disadvantage is largely true but the same about the non-tariff barriers may not be acceptable to Bangladeshi exporters who have rather bitter experiences while doing business with India. Harassment in the form of anti-dumping measures, standardisation and phyto-sanitary clearance has been common. None of the speakers at the workshop baring the Indian High Commissioner to Bangladesh foresaw any tangible gains for Bangladesh from the proposed bilateral FTA with India. The very Indian attitude has given rise to suspicions in different circles in Bangladesh because of the fact that the Indian authorities are found to be relatively generous in offering concessions under the bilateral a FTA. But the same is not true in the case of multilateral FTA now being negotiated under the auspices of the South Asian Association for Regional Cooperation (SAARC). The pretty long negative list submitted by India is a pointer to that fact.
There is nothing wrong if India tries to sell more of its goods to a small neighbour like Bangladesh. Many countries with economic and political clout these days are trying to woo mainly their smaller neighbours to strike bilateral FTAs with a view to having free access to their markets. There exists a strong opinion that multilateral FTAs would protect interests of Bangladesh better. That may be partly true. But the fact remains that unless and until Bangladesh improves its capacity to export more at competitive prices, there would be little scope for it to benefit from both bilateral and multilateral free trade arrangements. Even common sense would dictate that the country should first acquire the much-needed comparative advantage before entering into bilateral free trade agreements, particularly with countries that have enormous capacity to export at competitive prices. Bangladesh would have to make lot of honest and sincere spadework to achieve competitive edge over others in the global market place and expand its export base. Meanwhile, India that has already emerged as a regional economic power needs to demonstrate its magnanimity towards a tiny neighbour like Bangladesh by removing all non- and para-tariff barriers to its (Bangladesh’s) exports and help narrow the huge trade imbalance between the two countries as far as possible. This would at least help generate a sense of confidence in the business and official circles here.
