Prime Minister Sheikh Hasina has given her seal of approval to a proposal to begin formal negotiations towards signing the Comprehensive Economic Partnership Agreement (CEPA) with India, according to sources in the know about the development.
She also agreed on including this deal signing issue in the joint statement to be issued by the Bangladeshi and Indian PMs during her upcoming visit to India slated for 5-7 September.
Earlier, the commerce ministry sent a summary to the premier, seeking her permission for starting talks over striking the proposed agreement.
Bangladesh is thus for the first time going to officially start negotiations on signing a free trade agreement (FTA) with any country. Some other countries, including China and Japan, have offered Bangladesh FTA proposals, but everything is now at an assessment stage.
The CEPA is a little different from the FTA as it covers many issues, including trade in goods and services, investment, intellectual property rights and e-commerce.
According to the summary on what Bangladesh and India will gain from the trade deal once it is signed, Bangladesh’s export earnings will shoot up by 190% and India’s by 188%.
Besides, Bangladesh and India will see their gross domestic product (GDP) grow by 1.72% and 0.03% respectively as revealed by a Dhaka-Delhi joint feasibility study.
“Signing such an agreement with major trade partners brings about good results. But a risk of a fall in revenue is also associated with it. In FY22, Bangladesh generated Tk17,964 crore against imports amounting to Tk1,44,160 crore,” the commerce ministry said in the summary.
If the CEPA is signed, import revenue will come down to a large extent in phases, it noted.
But as other aspects related to economic development, including services and investments, are included in CEPA, it is expected that there will be a positive impact on the overall economy if the deal is inked, the ministry pointed out.
In the last fiscal year, Bangladesh’s exports to India rose to nearly $2 billion for the first time, while imports stood at around $14 billion.
Officials at the commerce ministry said Bangladesh currently enjoys duty-free and quota-free benefits for all products except 25, such as tobacco and alcohol, in the Indian market as a least developed country under the South Asian Free Trade Area agreement.
When Bangladesh graduates to a developing country, such facilities will no longer be available in the market after 2026. As a result, there is a risk of a negative impact on exports to India, they also said.
According to the ministry, there are various types of non-tariff barriers to exports to India, including the imposition of an anti-dumping duty, testing and certification, inadequate port infrastructure, and road and waterway communication restrictions. If such barriers are removed, exports of Bangladeshi products have potential for further growth.
During the visit of Indian Prime Minister Narendra Modi to Bangladesh on 27 March 2021, the prime ministers of the two countries issued instructions on quickly completing the joint feasibility study relating to the signing of the CEPA to strengthen bilateral trade relations.
Accordingly, Bangladesh’s Foreign Trade Institute and India’s Centre for Regional Trade conducted a detailed joint feasibility study. Later in May this year, they sent the study report to their respective commerce ministries. The report came up with a positive opinion over beginning negotiations for the signing of CEPA.
The commerce ministry held an inter-ministerial meeting on the report and it decided to start negotiations with India for signing the CEPA with certain precautions.
On 26 July, ahead of the PM’s upcoming visit to India, Bangladesh High Commissioner to India Muhammad Imran met with India’s Commerce Secretary BVR Subrahmanyam and discussed various issues of bilateral trade.
At the time, India’s commerce secretary said, “The FTA negotiations should be done in a way that Bangladesh benefits more compared to India.”
Once the trade deal is signed, Bangladesh’s export earnings will go up by $3-5 billion and India’s by $4-10 billion in the next 7-10 years, according to a final draft report of the joint feasibility study by Dhaka and Delhi.
New investment windows will also open up for both countries thanks to the proposed CEPA, said the report.
The report says, “It may be concluded that the estimates and analysis of this study indicate that the proposed CEPA between India and Bangladesh is not only feasible but also mutually beneficial in terms of possible gains in the realms of trade in goods and services, and investment.”
Dr Mostafa Abid Khan, a trade policy analyst and trade negotiator, told The Business Standard that Bangladesh’s main goal during the CEPA negotiations should be staying eligible for duty-free export facilities in the Indian market even after LDC graduation.
“We should also try to remove non-tariff barriers that are hindering our exports to India,” he said.
Before starting formal negotiations, a detailed study needs to be done on what Bangladesh needs from India. In this case, it is also important to discuss with the private sector. Otherwise, it will not be possible to get expected benefits from the CEPA, he added.
Abdul Matlub Ahmad, president of Bangladesh-India Chamber of Commerce and Industries and former president of the Federation of Bangladesh Chambers of Commerce and Industries, told TBS that the value chain is now the most important issue in the world.
“India has cotton. We can make yarns and garments. So, if the CEPA is signed, joint investment as well as bilateral trade between the two countries will increase,” he said.
The skills and resources of the two countries can be utilised for each other’s development through the signing of the CEPA. This will benefit both countries. There will also be opportunities to create many jobs in Bangladesh, he noted.
“I agree with the fact that the final draft report of the joint survey has raised the possibility of increasing bilateral imports and exports,” Abdul Matlub added, hoping that the trade volume will further increase if the existing barriers to bilateral trade under the CEPA are removed.
Prof Mustafizur Rahman, distinguished fellow of the CPD, earlier told TBS that the signing of the CEPA can be a win-win for both countries as such a deal covers trade, investment, connectivity, logistics, and various policy coordination issues.
It is not just tariff adjustment or tariff reduction through the CEPA, “We also need to focus on how we can boost our investment in India’s north-eastern region and attract Indian investors to our special economic zones.”
“It will be particularly good for us if we can bring in Indian investment in our economic zones and target the Indian market, cashing in on the advantage of zero tariffs,” he added.
UK launches scheme to cut import tariffs from developing countries
Britain in its post-Brexit policy strategy has launched a new scheme to cut tariffs on hundreds of products imported to the United Kingdom from developing countries.
International Trade secretary Anne-Marie Trevelyan said the Developing Countries Trading Scheme (DCTS) goes further than the EU’s Generalized Scheme of Preferences, which the UK had previously rolled over into its statute book after leaving the bloc.
The DCTS will come into force in early 2023. British businesses can benefit from more than £750m per year of reduced import costs, leading to more choice and lower costs for UK consumers, the UK government claims.
A wide variety of products that aren’t widely produced in the UK will benefit from lower or zero tariffs – ranging from clothes and shoes to foods including olive oil and tomatoes.
Trevelyan said UK businesses will benefit from fewer trade barriers and lower costs, incentivizing them to import more goods from developing countries.
“As an independent trading nation, we are taking back control of our trade policy and making decisions that back UK businesses, help with the cost of living, and support the economies of developing countries around the world,” she said.
Marco Forgione, director general of the Institute of Export & International Trade (IOE&IT), welcomed the move, saying: “International trade has a key role to play in lifting people out of poverty, transforming communities and increasing sustainability. The UK’s new tariffs regime is an important step in achieving these goals.
“As well as reducing duties, non-tariff barriers also need to be addressed. That’s why we continue to work closely with governments and trade organizations both home and abroad to look at ways to facilitate easier trade and improve skills.
“Using technology to modernize borders and implement trusted trader schemes is the key next step in improving trade in and with developing countries.
“This is evidenced by the Trade Logistics Information Pipeline (TLIP) initiative we set up in Kenya in partnership with TMEA and the IOTA Foundation. A similar project between Kenya and the Democratic Republic of Congo which has reduced transportation from three weeks to three days.”
The DCTS covers 65 countries across Africa, Asia, Oceania and the Americas and includes some of the poorest countries in the world. As announced last year, countries qualify for the DCTS if they are within the UN’s least developed country framework or the World Bank’s measure of low-income and lower-middle-income countries.
The Independent reports examples of duty reduction including a 14% decrease for bikes from Bangladesh, 12% on T-shirts from Cambodia, 12% on baby clothes from Sri Lanka, 8% on roses from Ethiopia and 8% on onions from Senegal.
It also removes some seasonal tariffs for goods that can’t be produced can’t be grown in the UK at certain times of the year. Further, the scheme simplifies complex trade rules – including rules of origin – making it easier for businesses in developing counties to export to Britain.
However according to BBC, the plans for the DCTS includes powers to suspend a country on the grounds of human rights or labor violations, as well as for not meeting their climate change obligations. Although the changes could save importers millions, the price savings for consumers may be marginal, the BBC’s global trade correspondent Dharshini David claims.
