Prime Minister Sheikh Hasina’s latest official visit to India culminated in the signing of a slew of agreements, a framework deal for defense cooperation over the next five years and an additional $ 500 million to buy military equipment from India. The agreement also witnessed a $ 4.5 billion concessionary line of credit from India for development projects in Bangladesh. An agreement to develop its civil nuclear programme is also a milestone. Her visit marked the “golden era” of India- Bangladesh relations as Prime Minister Narendra Modi remarked with a fond wish that India will perform her role as “long–standing and trusted development partner of Bangladesh.”
When you look into the profile of 22 agreements and Memorandum of Understandings [MoU] probably you would miss a vital issue on the growing trade imbalance between Bangladesh and India. There is a MoU between India and Bangladesh on Establishing Border Haats across the border between India and Bangladesh, but not any bilateral deal on any trade concessions or facilitation. Trade between neighbours is important on many counts. The consideration of distance and cost are two important elements in the integration process. This makes the trade profitable and help in the development of indigenous industries. Especially, the trade between Bangladesh and the seven sisters of India is mutually beneficial because of geographical proximity.
India is one of the important trade partners of Bangladesh. When you add the import payments and the export earnings of Bangladesh, it is approximately 10 percent of the global trade. Though the current trade volume approximately $ 6.5 billion looks impressive but Bangladesh’s exports to India worth of $500 million is paltry and this trade deficit constitute a perennial burden for Bangladesh. The trade gap was $ 4.76 billion in the financial year 2015-16 and the deficit was $ 5.28 billion in financial year 2014-2015. It is the common perception that bilateral trade helps India at the cost of Bangladesh. Again, the total trade volume may be twice when you consider the illegal trade in goods and services.
There are provisions of certain duty –free export facilities by India except for a select list of 25 items that could help reducing the growing trade gap. Nevertheless, certain tariff and non- trade barriers to trade that may hack the fair trade environment and baffle the cooperative spirit of trade between these two friendly neighbours. Two incidents are important to quote here. One is the anti-dumping duty on jute goods and the other is the anti-dumping duty on hydrogen per oxide within a period of less than six months. India imposed anti-dumping on January 5 on imports of jute and jute goods from Bangladesh; the duty ranges between $19 and $ 352 per ton. The export of jute and jute goods to India constitute roughly 20 percent of global export of jute goods which is less than 10 percent of the demand in the Indian market. The most recent incident is the imposition of anti-dumping duty on hydrogen peroxide that could destabilise the trade between India and Bangladesh. The duty ranges from $28 to $92 per ton.
The term dumping in international trade refers to selling of a product in a foreign country at a price which is less than the domestic price or at a price less than the average cost of production. When the importing country perceives that the product is dumped and may harm the domestic industry, then it start investigation to ascertain the extent of loss. If through investigation it is evident that there is dumping, the importing country imposes a duty known as anti-dumping duty. The duty generally represents the differences between the domestic price and the foreign price. Except predatory dumping that ultimately monopolises the foreign market, dumping seldom hurts the domestic producers. In many occasions, it helps the consumer with quality product at a relatively cheaper price. Again, the proposal on anti-dumping duty is forwarded by the domestic producer to sell the product with a higher markup at the cost of the consumer and is often considered on political ground. There are situations that the domestic producers and the consumer associations are often at the loggerheads on the question of anti-dumping duty.
Directorate General of Anti-Dumping and Allied Duties (DGAD) of India started its investigation in October on the issue of dumping of jute and jute goods and visited factories in Bangladesh to collect relevant data. Officials of the Tariff Commission attended several hearings in India before the conclusion of the investigation. However, the DGAD ultimately decidedthat there is dumping of goods and the imports were "undercutting and suppressing the prices of the domestic industry". India is a major destination point of hydrogen peroxide, a chemical that is used in textile industry. The manufacturing industries in Bangladesh may suffer heavily in capacity production due to the shrinkage of market and the price increase in the foreign market from $390 to $437. There is a possibility that anti-dumping duty may be imposed in fishing net exported by Bangladesh to India in future.
We observe many promotional activities to augment the bilateral trade between Bangladesh and India with a nice tone. The recent one is the 4th Indo-Bangla trade fair at Pan Pacific Sonargaon Hotel in the capital where trade bodies from both the countries attended but seldom has it brought the real concern; the growing trade deficit and the commitment of the surplus partners to narrow the gap. There are many unsettled issues of trade between Bangladesh and India.
One example is the certification issue and the product standard.
The case of anti-dumping [ DS 306] in battery export by Rahim Afroz is well known where the Government of Bangladesh resolved the issue through the Dispute Settlement Body [DSB] of the World Trade Organization [WTO]. We expect that the current issue may be settled through mutual understanding. The other alternative is to approach the DSB for a settlement that is not a nice maneuver on the part of two friendly neighbors.
The writer is a Professor of Economics, United International University.