BIMSTEC FTA: Bridging ASEAN and SAARC

FE Team | Published: September 27, 2007 00:00:00 | Updated: February 01, 2018 00:00:00

Shahiduzzaman Khan
Local trade experts contend that the negotiations on dismantling barriers to trade among the BIMSTEC member-countries should be concluded by December this year in order to bring about some changes in the lifestyle of the peoples of the region. Such talks were scheduled to be wrapped up in July last year. But the whole process failed to move forward due to political changes in Thailand and Bangladesh.
According to reports published in the FE this week, after a long gap of one and a half years, tough negotiations have just ended in Dhaka with a view to striking a free trade deal. The resumption of trade negotiations, no doubt, reflects the commitment of the regional leaders to infuse new momentum into the move.
The Bay of Bengal Initiative for Multi Sectoral Technical and Economic Cooperation (BIMSTEC) Framework Agreement on FTA was signed on February 8, 2004 and Bangladesh entered the deal on June 25, 2004. The agreement provides for negotiations on trade in goods, services and investment. It is seen as a bridge between the ASEAN and the SAARC. Its members are likely to be benefited from the global trend in putting in place regional trading arrangement without undermining the multilateral trading system. The BIMSTEC groups Bangladesh, Myanmar, India, Sri Lanka, Thailand, Nepal and Bhutan.
It appears that the issues of downsizing the negative list of products and determination of rules of origin are the stickiest points in the current talks. The size of the negative list remains yet to be undetermined. Thailand wants it to be 10 per cent of the total tariff line while Bangladeshi negotiators have a mandate of 24 per cent. It's now upto the negotiators of India, Sri Lanka and Bangladesh whether they agree to a deep cut in tariff line. There's also a difference of opinion between New Delhi and Bangkok on rules of origin.
Under the fast track, India, Sri Lanka and Thailand were scheduled to reduce duties on identified items between July 1, 2006--June 30, 2009 for the developing countries and July 1, 2006--June 30, 2009 for the LDC countries. Bangladesh, Myanmar, Bhutan and Nepal will have to reduce duties for goods under the fast track by June 30, 2011 for developing countries and June 30, 2009 for LDC members. The time-frame for tariff elimination for India, Sri Lanka and Thailand for products under the normal track was scheduled for the period between July 1, 2007 and June 30, 2012 for the developing countries and until June 30, 2010 for the LDCs.
Earlier, differences between India and Thailand over finalising the percentage of value addition under the rules of origin criteria led to the failure of the meeting on rules of origin. Negotiators from the member countries of the BIMSTEC in their last meeting failed to reach a consensus on the criteria of rules of origin under the pact. Thailand was in favour of a 30 per cent value addition for developing member countries while India opposed the proposal fearing a possible invasion of its market by Thai products. India lobbied for a 40 per cent value addition under the rules of origin criteria for developing member countries, but the Thai negotiators opposed the move. Bangladesh, Nepal, Bhutan and Myanmar proposed a 25 per cent value addition, which did not receive the required attention from the developing members as they were busy setting down their own issues of value addition.
The BIMSTEC provides a unique link between South Asia and Southeast Asia, bringing together 1.3 billion people -- 21 per cent of the world population, a combined GDP of US$750 billion, and a considerable amount of complementarities. According to a study, if operational, the BIMSTEC FTA will help boost regional trade estimated between US$ 43 billion and $59 billion a year.
Another area of cooperation is to do with combating terrorism and transnational crimes. The BIMSTEC is already working to prepare reports on intelligence sharing and stop terror financing. Illicit trafficking of humans, drugs and explosive substances will also be checkmated on top priority basis as well. In addition to the six areas of cooperation originally identified, seven new areas have been added to the list. The new agenda include: poverty alleviation, agriculture, cultural cooperation, disaster management, public health and people-to-people contact.
Regional cooperation is no longer a matter of choice for South Asia. At a time when countries throughout the world are regrouping on the basis of economic blocs, South Asia can ill afford to remain immobilised in political discord. On the economic front, South Asian countries have been more enthusiastic about opening their domestic markets to countries outside the region rather than to each other. Only 13.3 per cent of South Asian total trade is with in the region compared to over 55 per cent for the ASEAN countries. A small step towards economic integration could translate into net benefits of nearly $1.5 billion.
One may question the justification of so many regional and sub-regional initiatives and the advisability of joining all or many of them. The answer, however, might be: instead of looking at multiplicity of initiatives in a competitive sense, it would be more logical to look at the possible synergies that these initiatives may bring -- both to the groupings and the participating nations.
There is a pressing need for the countries of the new grouping understand the tremendous potential for growth in the region under the BIMSTEC. There is, indeed, great wisdom in what the Thai premier said at the last summit: Unless BIMSTEC nations rally to build their economies, they would be no more than a small blip on the radar screen of the rest of the world.