Lessons from trading with India
Thursday, 20 March 2008
Syed Jamaluddin
SOME time back Dhaka requested New Delhi to immediately issue customs notification so that Bangladesh exporters could start duty-free export of eight million pieces of ready-made garments to India. Bangladesh Foreign Ministry also contacted the Indian External Affairs Ministry requesting them to make the bilateral agreement operational. Delhi was supposed to notify its customs about the deal soon after the signing of the agreement.
Bangladeshi businessmen blamed Delhi for delaying the export to the Indian market. The delay in customs notification is a kind of non-tariff barrier. For Bangladesh the quantity of eight million pieces is very negligible since Bangladesh exports apparels worth $ 9.0 billion to the world market annually. But the symbolic export of eight million pieces will help local exporters explore the huge Indian market for reducing trade gap to some extent. Although India made the offer of duty-free RMG export two and a half years ago under the South Asian Free Trade Agreement (SAFTA) framework, there was no understanding on the modality for export.
New Delhi has finally given its approval on the duty free access of eight million pieces of Bangladeshi garments to the Indian market. The Indian Cabinet in a meeting on March 13, 2008 endorsed the deal that it signed with Bangladesh in September last. Similarly, the Indian government gave its approval to Sri Lanka for duty free access of up to six million pieces of garments. So duty-free access to Bangladesh is not a special concession to Bangladesh only. Bangladesh has issued notification-stipulating modalities for export. But the garments have not yet moved for export to India. Bangladesh has to find the buyers in India.
India has not been generous in opening its market to Bangladesh. Even the enforcement of SAFTA has not helped much. The Indian leaders during their official visit to Bangladesh or during formal talks with Bangladesh leaders visiting New Delhi have, time and again, expressed their eagerness to remove obstacles to the entry of Bangladeshi goods to Indian market. The Indian Commerce Minister in 2005 promised his country would allow duty-free entry of Bangladesh's eight million pieces of RMG products with a view to boosting bilateral trade and reducing trade imbalance. But the situation on the ground has not changed much until now.
India has raised the price of rice exported to Bangladesh several times in the last couple of months. Open market price of rice in India is $ 330 to $ 340 per tonne. Initially it was raised to $ 425 per tonne. Thereafter, it was raised to $ 500. Finally it has gone upto $ 650 per tonne. This resulted in a series of price-hike of rice in Bangladesh. They also imposed a ban on loading not more than 10 tonnes of cargo per truck. The Indian traders failed to get approval from the Indian customs for export of rice for which letters of credit were opened earlier. Bangladesh High Commission in New Delhi is keeping in touch with the Indian authorities and requesting them to change their decision.
The High Commission of India in Dhaka commented that media reports regarding India's applying of its minimum export price were misleading and inaccurate. The Indian decision was not country-specific. This clarification is naive. It seriously affected Bangladesh which is importing rice from India. The Indian export of rice to other countries is negligible.
Hundreds of lorries carrying consignments of rice for Bangladesh remained stranded at the Petrapole land port in India as several meetings between the Indian exporters and customs officials failed to reach any decision regarding resuming export to Bangladesh. It was, however, mentioned that the Indian government's decision to suspend rice export will not hamper the export of 0.5 million (5.0 lakh) tonnes of rice to Bangladesh as pledged after cyclone sidr. The Indian Foreign Minister had promised this consignment of 0.5 million tonnes despite the ban Delhi had imposed on export of non-Basmati rice to ensure enough supply of the grain in the domestic market. He said the decision to "waive the ban" had been taken in the context of the "magnitude of the natural calamity" in Bangladesh.
Prices of course rice continued to rise in retail and wholesale markets in Dhaka due to India's latest restriction on exporting rice at prices not lower than $ 650 per ton. Sources in the Bangladesh Ministry of Food and Disaster Management said the government will try to negotiate with its Indian counterpart to overcome the obstacles to importing rice from that country.
Export of rice at a price of $650 per tonne is a new condition. Even the letter of credit opened earlier will be cancelled if this order is not complied. The Indian customs did not allow any rice-laden trucks to enter Bangladesh although the Finance Ministry of India relaxed the ban on particular consignments of rice. A new problem has arisen because India has just announced that rice will be exported to Bangladesh only through seaports. This means rice can not be imported from India through the land ports. Delhi's rice of friendship for Dhaka is stewing in a bureaucratic pot, said an Indian newspaper report.
Floods and cyclone have caused serious damage to food and other crops in Bangladesh. This has created a huge shortage. Prompt import has not been arranged. Donors have not responded favourably in delivering food aid. It was not possible to expedite import of 0.5 million tonnes of rice from India. Private sector import of rice from India has been hampered time and again due to restriction imposed by India which is aware that Bangladesh is in serious need of food imports and we are dependent on India for rice import. India is perhaps taking advantage of this situation.
Bangladesh has requested the World Bank to mediate about the pricing of rice for export. But this may also be raised with the World Trade Organisation (WTO) to be discussed in the context of trade policy review of India. India will then have to explain their pricing policy before other members of the WTO.
We have discussed above two examples of our experience of trading with India which is not encouraging. It is unwise to depend on a particular country for importing a critical item like rice. We are now paying a price for this. If our imports were planned from Myanmar, Thailand, Vietnam and Pakistan side by side with India, then this situation could have been avoided. Prices of rice and wheat are expected to register further rise in the international market. Our food import has to be carefully planned.
..............................................
The writer is an economist and columnist
SOME time back Dhaka requested New Delhi to immediately issue customs notification so that Bangladesh exporters could start duty-free export of eight million pieces of ready-made garments to India. Bangladesh Foreign Ministry also contacted the Indian External Affairs Ministry requesting them to make the bilateral agreement operational. Delhi was supposed to notify its customs about the deal soon after the signing of the agreement.
Bangladeshi businessmen blamed Delhi for delaying the export to the Indian market. The delay in customs notification is a kind of non-tariff barrier. For Bangladesh the quantity of eight million pieces is very negligible since Bangladesh exports apparels worth $ 9.0 billion to the world market annually. But the symbolic export of eight million pieces will help local exporters explore the huge Indian market for reducing trade gap to some extent. Although India made the offer of duty-free RMG export two and a half years ago under the South Asian Free Trade Agreement (SAFTA) framework, there was no understanding on the modality for export.
New Delhi has finally given its approval on the duty free access of eight million pieces of Bangladeshi garments to the Indian market. The Indian Cabinet in a meeting on March 13, 2008 endorsed the deal that it signed with Bangladesh in September last. Similarly, the Indian government gave its approval to Sri Lanka for duty free access of up to six million pieces of garments. So duty-free access to Bangladesh is not a special concession to Bangladesh only. Bangladesh has issued notification-stipulating modalities for export. But the garments have not yet moved for export to India. Bangladesh has to find the buyers in India.
India has not been generous in opening its market to Bangladesh. Even the enforcement of SAFTA has not helped much. The Indian leaders during their official visit to Bangladesh or during formal talks with Bangladesh leaders visiting New Delhi have, time and again, expressed their eagerness to remove obstacles to the entry of Bangladeshi goods to Indian market. The Indian Commerce Minister in 2005 promised his country would allow duty-free entry of Bangladesh's eight million pieces of RMG products with a view to boosting bilateral trade and reducing trade imbalance. But the situation on the ground has not changed much until now.
India has raised the price of rice exported to Bangladesh several times in the last couple of months. Open market price of rice in India is $ 330 to $ 340 per tonne. Initially it was raised to $ 425 per tonne. Thereafter, it was raised to $ 500. Finally it has gone upto $ 650 per tonne. This resulted in a series of price-hike of rice in Bangladesh. They also imposed a ban on loading not more than 10 tonnes of cargo per truck. The Indian traders failed to get approval from the Indian customs for export of rice for which letters of credit were opened earlier. Bangladesh High Commission in New Delhi is keeping in touch with the Indian authorities and requesting them to change their decision.
The High Commission of India in Dhaka commented that media reports regarding India's applying of its minimum export price were misleading and inaccurate. The Indian decision was not country-specific. This clarification is naive. It seriously affected Bangladesh which is importing rice from India. The Indian export of rice to other countries is negligible.
Hundreds of lorries carrying consignments of rice for Bangladesh remained stranded at the Petrapole land port in India as several meetings between the Indian exporters and customs officials failed to reach any decision regarding resuming export to Bangladesh. It was, however, mentioned that the Indian government's decision to suspend rice export will not hamper the export of 0.5 million (5.0 lakh) tonnes of rice to Bangladesh as pledged after cyclone sidr. The Indian Foreign Minister had promised this consignment of 0.5 million tonnes despite the ban Delhi had imposed on export of non-Basmati rice to ensure enough supply of the grain in the domestic market. He said the decision to "waive the ban" had been taken in the context of the "magnitude of the natural calamity" in Bangladesh.
Prices of course rice continued to rise in retail and wholesale markets in Dhaka due to India's latest restriction on exporting rice at prices not lower than $ 650 per ton. Sources in the Bangladesh Ministry of Food and Disaster Management said the government will try to negotiate with its Indian counterpart to overcome the obstacles to importing rice from that country.
Export of rice at a price of $650 per tonne is a new condition. Even the letter of credit opened earlier will be cancelled if this order is not complied. The Indian customs did not allow any rice-laden trucks to enter Bangladesh although the Finance Ministry of India relaxed the ban on particular consignments of rice. A new problem has arisen because India has just announced that rice will be exported to Bangladesh only through seaports. This means rice can not be imported from India through the land ports. Delhi's rice of friendship for Dhaka is stewing in a bureaucratic pot, said an Indian newspaper report.
Floods and cyclone have caused serious damage to food and other crops in Bangladesh. This has created a huge shortage. Prompt import has not been arranged. Donors have not responded favourably in delivering food aid. It was not possible to expedite import of 0.5 million tonnes of rice from India. Private sector import of rice from India has been hampered time and again due to restriction imposed by India which is aware that Bangladesh is in serious need of food imports and we are dependent on India for rice import. India is perhaps taking advantage of this situation.
Bangladesh has requested the World Bank to mediate about the pricing of rice for export. But this may also be raised with the World Trade Organisation (WTO) to be discussed in the context of trade policy review of India. India will then have to explain their pricing policy before other members of the WTO.
We have discussed above two examples of our experience of trading with India which is not encouraging. It is unwise to depend on a particular country for importing a critical item like rice. We are now paying a price for this. If our imports were planned from Myanmar, Thailand, Vietnam and Pakistan side by side with India, then this situation could have been avoided. Prices of rice and wheat are expected to register further rise in the international market. Our food import has to be carefully planned.
..............................................
The writer is an economist and columnist