Narrowing Indo-Bangladesh trade gap
Monday, 11 January 2010
THE countervailing duty recently imposed by India on apparel items made of cotton and blended or other natural and manmade fibre fabrics, as reported in this paper last Saturday, is a portentous signal. And to make things worse for the exporting countries, imported apparel items are being subjected to countervailing duty on the basis of their maximum retail price, instead of ad-valorem. Bangladesh RMG exports are also being subjected to the same duty by the Indian authorities.
Under the World Trade Organisation (WTO) rules, any country has the right to impose countervailing duty on a product to protect the interests of the domestic producers of the same. Such duty is imposed to neutralise the negative effects of subsidies provided to its exports by a foreign country. However, the government of an importing country is not expected to impose the duty summarily. It can choose to enforce the countervailing duty on an item only after conducting necessary investigation when at least 25 per cent of the domestic producers of the same would apply, in writing, seeking protection.
The imposition of the countervailing duty on some selected RMG products has given rise to confusion among the Bangladesh exporters since India is committed to importing 8.0 million pieces of Bangladesh RMG duty-free. The latest Indian government order imposing the countervailing duty has not exempted such imports from Bangladesh. Indian importers of Bangladesh RMG products are being made to pay the countervailing duty. This action by the Indian government does appear to be contradictory, in substance. On the one hand, it allows import of certain volume of Bangladesh RMG duty-free as a 'gesture of goodwill' and, on the other, it imposes punitive countervailing duty on the same.
Moreover, the Indian authorities, as the WTO rules demand, should have informed Bangladesh about the imposition of countervailing duty on its RMG exports. The industry leaders here have said they were not consulted before imposition of the duty. The Indian action would, rightly or wrongly, strengthen the fear among the local business community about the erection of tariff and non-tariff barriers to Bangladesh exports. Being a least developed country (LDC), Bangladesh expects duty-free entry of goods to the Indian market under a number of multilateral trading arrangements including the South Asia Free-Trade Agreement (SAFTA). But, the ground will only be made stronger now, on real or perceived grounds, for some quarters to pronounce aloud about India deliberately putting up non-tariff barriers to entry of Bangladesh goods to its market. This is more so because India is yet to clarify its stance on the issue.
Expectations are now otherwise running high that the relations between the two neighbours would soon receive a boost. The visit of Bangladesh Prime Minister Sheikh Hasina that began Sunday is aimed at confidence-building and resolving a few long-standing irritants to the bilateral relations. The issue of trade between the two countries is expected to figure prominently during the highest-level bilateral discussions on the occasion. Bangladesh is in a disconcerting situation as far as its trade with India is concerned. Its trade deficit with India has been widening. None expects the removal of such trade imbalance overnight. What all concerned would like India to do most is the taking of effective policy-steps, backed by a strong political will, to narrow the trade gap gradually. And India as a giant trade partner is in a better position to be pro-active on this score.
On its part, Bangladesh does certainly deserve a fair treatment by India as a least developed country (LDC) member of SAFTA and other multilateral trading arrangements. As a matter of goodwill and also in the interests of mutually fruitful bilateral cooperative partnership, India, as all concerned would expect, should take effective steps to remove all tariff and non-tariff barriers to facilitate smooth flow of Bangladesh goods to the Indian market. A positive response on India's part on this issue would help, to a great extent, to allay any mistrust and frustration among the Bangladesh business community.
Under the World Trade Organisation (WTO) rules, any country has the right to impose countervailing duty on a product to protect the interests of the domestic producers of the same. Such duty is imposed to neutralise the negative effects of subsidies provided to its exports by a foreign country. However, the government of an importing country is not expected to impose the duty summarily. It can choose to enforce the countervailing duty on an item only after conducting necessary investigation when at least 25 per cent of the domestic producers of the same would apply, in writing, seeking protection.
The imposition of the countervailing duty on some selected RMG products has given rise to confusion among the Bangladesh exporters since India is committed to importing 8.0 million pieces of Bangladesh RMG duty-free. The latest Indian government order imposing the countervailing duty has not exempted such imports from Bangladesh. Indian importers of Bangladesh RMG products are being made to pay the countervailing duty. This action by the Indian government does appear to be contradictory, in substance. On the one hand, it allows import of certain volume of Bangladesh RMG duty-free as a 'gesture of goodwill' and, on the other, it imposes punitive countervailing duty on the same.
Moreover, the Indian authorities, as the WTO rules demand, should have informed Bangladesh about the imposition of countervailing duty on its RMG exports. The industry leaders here have said they were not consulted before imposition of the duty. The Indian action would, rightly or wrongly, strengthen the fear among the local business community about the erection of tariff and non-tariff barriers to Bangladesh exports. Being a least developed country (LDC), Bangladesh expects duty-free entry of goods to the Indian market under a number of multilateral trading arrangements including the South Asia Free-Trade Agreement (SAFTA). But, the ground will only be made stronger now, on real or perceived grounds, for some quarters to pronounce aloud about India deliberately putting up non-tariff barriers to entry of Bangladesh goods to its market. This is more so because India is yet to clarify its stance on the issue.
Expectations are now otherwise running high that the relations between the two neighbours would soon receive a boost. The visit of Bangladesh Prime Minister Sheikh Hasina that began Sunday is aimed at confidence-building and resolving a few long-standing irritants to the bilateral relations. The issue of trade between the two countries is expected to figure prominently during the highest-level bilateral discussions on the occasion. Bangladesh is in a disconcerting situation as far as its trade with India is concerned. Its trade deficit with India has been widening. None expects the removal of such trade imbalance overnight. What all concerned would like India to do most is the taking of effective policy-steps, backed by a strong political will, to narrow the trade gap gradually. And India as a giant trade partner is in a better position to be pro-active on this score.
On its part, Bangladesh does certainly deserve a fair treatment by India as a least developed country (LDC) member of SAFTA and other multilateral trading arrangements. As a matter of goodwill and also in the interests of mutually fruitful bilateral cooperative partnership, India, as all concerned would expect, should take effective steps to remove all tariff and non-tariff barriers to facilitate smooth flow of Bangladesh goods to the Indian market. A positive response on India's part on this issue would help, to a great extent, to allay any mistrust and frustration among the Bangladesh business community.