Intra-regional trade: Removing regulatory and trust barriers

The removal by India of the remaining traces of discriminatory treatments given to Bangladeshi imports relative to those from other least development countries (LDCs) on November 9, 2011, marks a watershed in Bangladesh-India trade relations. November 9, 2011 marks a watershed in Bangladesh-India trade relations. On that day, India removed the remaining traces of discriminatory treatments given to Bangladeshi imports relative to imports from other least development countries (LDCs) of the SAARC region. The so-called 'sensitive list' long imposed by Indian authorities to curb imports from Bangladesh, had been the biggest thorn in bilateral trade from this side of the border. Over the last four years, items on the sensitive list has been scaled back from more than 700 to just 25 today and that too for only tobacco and alcohol products. India being Bangladesh's biggest regional trade partner and the second- largest source of its imports, the undoing of the sensitive list will go a long way in increasing Bangladesh's exports to India and thereby make a big dent in the US$4.0 billion trade gap today. No doubt Bangladesh-India trade will reach unprecedented heights in the coming years. Many industry leaders and trade observers believe Bangladesh's exports to India could quadruple to $2.0 billion within the next three years. The removal of the regulatory barrier will also see Indian investments trickling in as Indian businesses will increasingly leverage Bangladesh's highly competitive apparel industry for its retailers, especially chain retailers. There have been grievances from Bangladeshi traders on non-tariff barriers as well, the most irksome being the testing and product certification procedures by Indian authorities which sometimes can take up the better part of a year. These non-tariff barriers is caused by the lack of general testing labs near the land-ports through which most of the Bangladesh-India trade takes place. This is now being addressed through several initiatives on both sides which include setting up general-purpose testing labs near the land-ports and also giving mutual recognition to national standards and tests. Once these initiatives bear fruit, these non-tariff barriers will be history. There was one other rather unfriendly non-tariff abrrier between India and Bangladesh and that had to do with a peculiar exception applied to any investments from Bangladesh. This was particularly appalling as the only other country that has been meted out such treatment by India, is Pakistan - a country with which it is on a constant state of war-readiness. This peculiarity has also been removed recently and a prominent Bangladeshi fast-moving-consumer-goods (FMCG) company has been able to set up a plant in the Eastern part of India to cater to huge demand of their products there. Bangladesh is also a net importer from its other SAARC neighbours, such as, Bhutan, Nepal and Pakistan. While the imports from Pakistan are high on account of import of apparel and textile manufacturing raw-materials such as fabric, yarn and cotton, the trade gaps with Bhutan and Nepal can only be due to lack of access to those markets. The road links between Bangladesh and these land-locked countries through India is of paramount importance here. Overall intra-SAARC trade is between 5.0 to 7.0 per cent of the total which compares to 60 per cent or more for the tightly integrated regional trade blocs such as the ASEAN of South East Asia, EU of Europe or NAFTA of North America. The regulatory bottlenecks alone cannot explain this low level of intra-regional trade. The cognoscenti points to the lack of trust between the regional countries as another major factor restricting trade within the region. This factor given the appellation of 'non-trusting-instincts or NTIs' by this author, is a holdback to the troubled past of the region. While the Kashmir confrontation between the two nuclear-power neighbours, i.e., India and Pakistan will not go away any time soon, the historical animosity and 'NTIs', wrought out of the fratricidal division of the Indian Sub-continent in the first half of the last century, can be healed through greater trade interaction between the peoples of the region, especially South Asia. The reduction of the 'sensitive list' by India to only a few tobacco and alcohol product imports from Bangladesh is bound to usher in a new era of increased optimism and trade between the two neighbours. The Indian announcement on November 9 happened to coincide with the birthday of this author who is now longingly looking forward to the next big act in cutting through NTIs with the momentous announcement of introducing on-arrival visa to Bangladeshi travelers to India before his next birthday. Readers are requested to watch Episode 10 of Orthonitir Chaka today (Sunday, November 27) at 5:30pm on Boishakhi Television for an eye-opening discussion on regional trade developments with Dr. Gowher Rizvi, Foreign Affairs Adviser to the Prime Minister and Ambassador Farooq Sobhan, President, Bangladesh Enterprise Institute. The programme will be repeated at 12:30am and will also be available online from Thursday at BDeshTV.com. The Financial Express is the media partner and American International University of Bangladesh (AIUB) is the technical collaboration partner of Orhonitir Chaka. The writer is an IT entrepreneur, policy activist and the anchor of Orthonitir Chaka. He can be reached at email: hnkarim@gmail.com