The governing principles of transhipment and transit in international trade, as laid down under paragraphs 1 and 2 of Article V of the General Agreement on Tariffs and Trade (GATT), state that goods (including baggage), and also vessels and other means of transport, "shall be deemed to be in transit across the territory of a contracting party when the passage across such territory, with or without trans-shipment, warehousing, breaking bulk, or change in the mode of transport, is only a portion of a complete journey beginning and terminating beyond the frontier of the contracting party across whose territory the traffic passes."
"Traffic of this nature is termed, in this article, as "traffic in transit". "There shall be freedom of transit through the territory of each contracting party, via the routes most convenient for international transit, for traffic in transit to or from the territory of other contracting parties. No distinction shall be made which is based on the flag of vessels, the place of origin, departure, entry, exit or destination, or on any circumstances relating to the ownership of goods, of vessels or of other means of transport." So that article states.
Interpretation of the article is as follows: In negotiating Article V, the contracting parties considered a covenant known as the Barcelona Convention, regulating the conditions a Member could apply to goods of another Member passing through its territory to a third destination. parts of Article V were effectively drawn from corresponding provisions of that Convention.
The doctrine of third country transit as was put forward by Indian Prime Minister, Dr. Manmohan Singh in his opening address given at the inaugural ceremony of the 13th SAARC Summit notes that all South Asian countries "would provide each other, reciprocally, transit facilities to third countries". According to him, this is the wisest and best interpretation of our International and Regional commitments and obligations relating to trade and transit in the region and beyond."
The extracts of his address can be cited here. "We need to recharge and regenerate the arteries of transport and communication that bind us together and in turn link our region to the rest of Asia to reclaim the property that is undoubtedly our due." "In pursuit of this vision, let us agree, at this summit, that all South Asian countries would provide each other, reciprocally, transit facilities to third countries, not only connecting one another, but also connecting to the larger Asian neighbourhood, in the Gulf, Central Asia and the South-East Asia."
Governing Agreement and Laws of "Transhipment" and "Transit " in Bangladesh: Bangladesh is pursuing an uneducated, asymmetric, and unilateral "Transhipment" and "Transit policies, much to the detriment of its interest, deviating from ARTICLE V OF GATT 1994 and Article - 8 of SAFTA Agreement, relating to "g) transit facilities for efficient intra-SAARC trade, especially for the land-locked Contracting States".
Bangladesh agreed to provide passage (transit) of goods between two places in India through the territory of Bangladesh under Article VIII of Bangladesh-India Trade Agreement, 1986 that was renewed on March 21, 2006 in New-Delhi by Mr. Kamal Nath, the then Minister of Commerce and Industry Government of the Republic of India and Mr. M. Saifur Rahman, the then Minister for Finance & Planning Government of People's Republic of Bangladesh.
Article VIII of the agreement of 1986 states: "The two Governments agree to make mutually beneficial arrangements for the use of their waterways, roadways and railways for commerce between the two countries for passage of goods between two places in one country through the territory of the other."
Sections 121 and 127 of the Bangladesh Customs Act, 1969 also provide for "transhipment" and "transit "of goods between two places in one country through the territory of the other without payment of duty.
The government of Bangladesh must set things right within the limits of ARTICLE V of GATT 1994 and Article - 8 of SAFTA Agreement and regulate "transhipment" and "transit" and passage of goods from one country only to any other country through the territory of Bangladesh.
Bangladesh-India-Nepal-Bhutan Transit: The Banglabandha-Fulbari land route is particularly important for facilitating trade with Nepal, Bhutan and the north-eastern states of India. Nepali vehicles are not allowed to enter Bangladesh and vice versa, and the consignments need to be transshipped to Indian trucks at a border point, which is some 400 meters, ahead of the land port. The Indian truckers demand abnormally high charges adding to the cost of Bangladeshi exports to the landlocked Himalayan kingdom. India allows only two-hour transit time for movement of trucks through the 52-Km corridor of Indian transit point from Banglabandh land port to the Nepalese border.
In this context, Bangladesh should urge India to extend the transit time up to, at least, eight hours from two hours, and ensure the right of transit and trans-shipment to Bangladeshi and Nepali vehicles to facilitate trade in the land locked region.
Gas and hydro electricity from Myanmar: The robust growth of its economy will make Bangladesh an energy-hungry country. The country will be looking for more and more fuel as demand soars with rapid economic growth; and our small reserve of natural gas will be used up in less than a decade.
The demand for electricity in Bangladesh is increasing at a very rapid rate -- at least 2,000 MW a year, to keep pace with economic performance. The domestic production of gas and coal will be unable to meet the requirement of increased power generation.
We must, therefore, seriously look for importing electricity and natural gas to keep pace with our rapidly falling reserves. We can get supply of gas and hydro electricity from Myanmar most conveniently, compared to other sources including hydro electricity from much talked-about Nepal and Bhutan.
Tri-nation gas pipeline: Myanmar India gas pipeline through Bangladesh is a very strategically important issue for Bangladesh. In order to ensure long term energy security, Bangladesh must outsource its energy resources and Myanmar, because of its proximity, is the ideal source of most convenient, safe and continued supply of electricity, oil and gas.
Bangladesh, therefore, should consider as to how it should take advantage of its locational position, as the first beneficiary at virtually no cost, by agreeing to allow Myanmar India gas pipeline to pass through its territory to avail the opportunity of obtaining supply of gas at highly cost effective price from Myanmar to meet its growing energy needs in addition to inherent revenue and other associated benefits.
India, Bangladesh, and Myanmar had agreed (2005) in principle to cooperate in a gas exploration and overland pipeline project. The pipeline would run from Arakan state in Myanmar, through Mizoram and Tripura, and cross Bangladesh before reaching Calcutta.
Under that agreement in principle, both Bangladesh and India would have the right to access the pipeline as and when required, including injecting and siphoning off their own natural gas. This pipeline would not only bring $125 million annually as transit fees from the pipeline, as proposed by India, but would also help Bangladesh to supply gas from its own fields in the Sylhet region, as well as from Tripura, to Khulna and Jessore.
In this context, it is worthwhile to consider the scope at this stage about Bangladesh taking advantage of the earlier-agreed Myanmar-India gas pipeline project.
Regional Transit: Bangladesh and its neighbouring land locked countries like Nepal and Bhutan, do need to ask for unequivocal rights of transit from one country through the territory of the second country to a third country as committed in Article V, of the GATT 1994. Member Countries must notify respective transit facilitating measures accordingly within a specific period.
Bangladesh is not required to, and must never, agree to allow passage of goods between two places in one country through its territory. But it should, on the other hand, must allow "transhipment" and "transit" of goods to a country through its territory to a third country and vice versa through its land and sea ports.
Conclusion: In a rapidly modernising and globalizing world, connectivity is the key to more regional trade and cooperation. Bangladesh enjoys a strategic geographical location and can be the bridge between South Asia and South East Asia. It can be the regional hub of transportation for eastern India, north east India, Nepal, Bhutan and the ASEAN countries, if it can capitalize its location advantages.
The World Bank (WB) observed that the trade between India and Bangladesh would do better if there was broad-based liberalisation, rather than a Free Trade Agreement (FTA). In its report entitled, 'India-Bangladesh Trade, Trade Policies and Potential Free Trade Agreement', the WB highlighted the need for exploring the implications of a bilateral free trade agreement. It said although bilateral free trade agreement would provide substantial benefits to Bangladeshi consumers by giving them access to cheaper exports from India. The consumer benefits, according to the study report, would far outweigh losses in government revenue or lost profits for local manufacturers.
The study went on to say such benefits could easily be wiped out, "if one does not make sure that the incentive systems give the right signals." By keeping out cheaper third-country imports, the FTA risks providing a captive, protected market where the Indian producers might collude amongst themselves or with Bangladeshi importers to artificially increase prices. On the other hand, cheaper goods from, let us say East Asia, might be excluded, forcing Bangladeshi consumers and businesses to overpay.
Although the report pointed at possible advantages it concluded that, based on potential economic benefits to both countries, "there is no compelling case for India and Bangladesh to pursue a bilateral FTA." Rather a broader-based liberalisation would be preferable since this would yield much larger economic benefits, whilst minimising risks.
The report said India and Bangladesh could still greatly benefit from cooperation in other areas, without necessarily implementing an FTA. Improvements in the transport, storage and administrative infrastructure at land borders would yield substantial benefits. Greater harmonisation and cooperation in customs administration and banking relationships would also be highly beneficial.
The writer is Adviser, Federation of the Bangladesh Chamber of Commerce & Industry or FBCCI. He may be reached at e-mail: mz0192003@yahoo.com
