Thursday, 7 July, 2022

India finalises draft of trade deal with Bangladesh

The proposed agreement aimed at reducing trade deficit between the two countries

India finalises draft of trade deal with Bangladesh

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New Delhi: India’s commerce ministry has finalised the draft of the proposed Comprehensive Economic Partnership Agreement (CEPA) between India and Bangladesh to increase the trade volume of both the countries and reduce the trade gap in phases.

The draft has been sent to commerce ministry of Bangladesh for consideration and it is expected that Indian External Affairs Minister S Jaishankar and his Bangladesh counterpart AK Abdul Momen will take a view of the issue when they meet at Guwahati in Assam later this month.

A high-level team from Bangladesh visited India on March 1-4 last and a Joint Study Group (JSG) for examining the feasibility of the CEPA submitted its recommendations to the ministries concerned of the two countries.

The proposed CEPA between India and Bangladesh has three dimensions: trade in goods, services, and investment.

Sources in the Indian Ministry of Commerce and Industry said the main aim of the proposed CEPA is to reduce the huge trade gap between the two countries and open up new economic opportunities, including connectivity, new market, cooperation and partnership.

Besides, the CEPA is planned to resolve the issues and challenges of anti-dumping duties and rules of origin through the perspective of multi-modal connectivity and deepening cooperation in sub-regional cooperation. It recognises the significant benefits of bilateral economic and commercial ties.

According to an official statement released by the India’s Ministry of Commerce and Industry, the CEPA will incorporate a variety of issues of mutual interest, including the development of railway infrastructure, port infrastructure, border haats, and regional connectivity through multi-modal transportation, harmonisation of standards and mutual recognition agreement.

The agreement is aimed at stepping up cooperation in new areas such as green technologies, renewables, and IT and digital platforms. The CEPA will also strengthen the scope of investment as it includes the new areas and ways of cooperation.

It will give a significant boost to the two-way trade. In addition, the agreement focuses on four areas for strengthening the India-Bangladesh partnership, which include connectivity and maintaining an uninterrupted supply chain keeping in view of the uncertain supply of onion and cotton from India, a joint production of defence equipment, exploring the potential area of investment and joint manufacturing of vaccine and other medicines.

Explaining the benefits of the agreement, an official said against the backdrop of growing bilateral trade, the trading regime between the two countries, including imports, exports and related rules and regulations, will get new momentum as the agreement has instruments to work jointly on trade, supply chain and production.

If the CEPA is operationalised, bilateral trade potential will be US$40 billion. India’s strong exports in services and Bangladesh’s exports in goods are a good cause to have a CEPA.

Bangladesh’s Commerce Minister Tipu Munshi during his last visit to India asserted that CEPA is very important in the long run for the expansion of trade and commerce.

The deal will produce a cluster of connectivity which will shape the future trade through the Asian Highway Network routes (AH-1 and 2), BBIN, BCIM and BIMSTEC, connecting India and Bangladesh at the Petrapole-Benapole, Fulbari-Banglabandha and Dawki-Tamabil points, and a new rail link between Akhaura (Bangladesh) and Agartala (India), among others.

India claims that once fully implemented, the agreement will ease the movement of personal, passenger and cargo vehicles across the borders.

This will be most visible in bordering areas of Bangladesh, where the price of goods could decrease by more than 4.5 percent. More trade and transit will inspire new economic activity to raise income and lower costs for businesses and consumers.

Connectivity facilities will have some trickle-down effects on other connectivity projects in the region. For instance, the BIMSTEC Conclave of Ports agreement linking Thailand’s Ranong Port with ports in Chennai, Vishakhapatnam and Kolkata, a BIMSTEC Coastal Shipping Agreement and a BIMSTEC Free Trade Agreement will bring more than 2 billion people -- 22 percent of world’s population -- together into an economic region.

It will pave the way for concluding FTAs and PTAs with other neighbouring countries of South Asia when Bangladesh embarks on signing FTA with Bhutan. Reports suggest that Bangladesh is planning to conclude trade agreements with Thailand and Nepal.

When the production hub and supply chain are materialised, it will create a new market for both the countries and the investment will get a new boost in the coming days.

Bangladesh has already set up three Special Economic Zones for Indian investors, and Indian companies are investing in various sectors, including telecommunications, pharmaceuticals, FMCG and automobiles, in Bangladesh.

These are seen as a significant backdrop to the more intense bilateral engagements in trade and investment that India and Bangladesh are chalking out through the CEPA. In addition, a thriving CEPA will support Indian northeast states to have access to Bangladesh for chemical fertiliser, raw jute and jute manufactures, frozen fish and readymade garments.