• Monday, Oct 18, 2021
  • Last Update : 03:31 am

'A trade deal with Bangladesh is a top priority for India'

  • Published at 11:24 pm October 13th, 2021
Bangladesh and India Flag
Bangladesh and India Flag Courtesy

The proposed Comprehensive Economic Partnership Agreement is a win-win for India and Bangladesh, and  Indian High Commissioner Vikram Doraiswami says India is ready for negotiations as early as January 2022. This is the fifth part of his interview series with Adam Pitman, exclusive to Dhaka Tribune

Dhaka wants a more competitive trade network to fuel Bangladesh's next phase of growth. 

Bangladesh is a part of several regional trade agreements. But the benefit of these agreements has begun to wane. The country has, arguably, reached the limits of low-value manufacturing and exports. 

Meanwhile, Bangladesh's least developed country (LDC) classification has allowed exports to benefit from preferential tariffs. They will expire after Bangladesh becomes a middle-income country.

The commerce ministry wants to extend LDC benefits, and close at least 11 agreements, to help meet these challenges. And in New Delhi, they have a partner they know how to work with. 

But will Dhaka and New Delhi make it happen? The high commissioner thinks they can.

DT: A bilateral free trade agreement would create income and drive growth in both countries. New Delhi and Dhaka have agreed to study something more ambitious – a Comprehensive Economic Partnership Agreement. Can you explain the timeline for the study and what will follow?

Doraiswami: Well, the original timeline for completion of the joint study -- for what we call a Comprehensive Economic Partnership Agreement, or CEPA, which is an FTA plus arrangement -- was September this year. However, we understand that the stakeholder consultations -- delayed because of the pandemic -- are still ongoing on the Bangladesh side. 

We hope that the final confirmation of the completion of the study will be received soon. 

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Since the study has not been finalized, I suppose it would be incorrect for me to go into the details of what the draft suggests. But I can say that the study suggests a good CEPA will create a clear and mutual benefit for both Bangladesh and India. 

Without going into the details, the draft study suggests that trade in goods will increase significantly as a result of a CEPA even without improving logistics, with a concomitant and positive impact on the GDP of both countries, albeit more positive for that of Bangladesh. 

The study also suggests that trade in services will also increase significantly, and it suggests some specific sectors and operations , such as telecom, IT and computer-related services, including in particular, startups in the IT and IT Enabled Services space, will benefit. Other areas of possible focus could include financial services and personal travel services etc that could be so tapped. 

Bangladesh, in particular, could earn significant incomes from freight and transport services to India. New business openings can be considered, including through investment, in education services and other skilling openings, which both sides could leverage. 

The study also recommends the inclusion of a chapter on investment, which is to say, it recommends that the two governments negotiate a bilateral investment agreement too, as part of the overall CEPA. 

Also Read - 'It is important for Bangladesh to engage with India at the state as well as central level'

This is in recognition of the fact that, recognizing that while India has been a top ten investor in Bangladesh consistently, there is headroom for growth of Indian investment in Bangladesh, and also the other way around too. 

As to next steps, once the report is accepted by the two sides, the commerce ministries will need to respectively seek a mandate to initiate CEPA negotiations. Thereafter, the two sides can form negotiating teams and start negotiating the coverage and extent of a CEPA. 

I personally believe that we should work quickly on this, with negotiations starting as early as January 2022. 

The two sides should aim to design a roadmap to a full CEPA  at the earliest, including modalities to protect Bangladesh’s current duty-free, quota-free trade benefits with India, as an LDC, under the SAFTA [South Asian Free Trade Area] process. 

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From our side, the CEPA with Bangladesh is a priority, so we hope that the two sides will be able to start work soon. 

DT: India hasn't entered into a new trade agreement for a while. Bangladesh doesn't have any bilateral FTAs right now. Meanwhile, there doesn't appear to be much popular support for an FTA in either country. Does the CEPA have a chance? 

Doraiswami: I can say with confidence that the CEPA with Bangladesh is among the few FTAs that our commerce ministry is prioritizing, in terms of its allocation of manpower for negotiation. 

It will be among a handful of similar arrangements that we will pursue, provided we are able to start the discussions with our counterparts in Bangladesh soon. 

There is every economic reason for us to prioritize this CEPA. 

This is a fast-growing trade relationship. The trendline is positive and clearly depicts that both India and Bangladesh have been each other's major markets. 

Also Read - 'We want more trade, travel, cooperation with Bangladesh, but ‘urban myths’ aren't helping'

And there is recognition of the fact, in both countries, that better connectivity, growing prosperity and a less politicized approach to trade and investment creates enormous head-room for growth in trade, investment flows and integrated production chains. 

This creates competitive advantages for both sides.  

Without presuming to speak for Bangladesh, I believe that those involved in trading and doing business recognize the opportunity of a fair and reasonable CEPA, which will include provisions not only on trade in goods and services, but also provisions for investment and possibly air services. 

Put it this way: Why would Bangladesh's business community not want to  try and sustain, or even improve, its current preferential access, even after LDC graduation, to one of the largest markets in the world, right next door?

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