Bangladesh-India bilateral trade is always a matter of sensitive debate and to many, the key reason for this sensitivity is the trade balance overwhelmingly tilted towards India. Experts have spent thousands of pages to analyse the trends, barriers and prospects of Indo-Bangla bilateral trade.
It is true, bilateral trade has increased over the years. During the last 15 years, volume of Indo-Bangla trade has increased five folds from $1.3 billion to $6.5 billion.
Exports to India have increased 7.6 times while imports from India have surged to around 5 times in the same period.
But in quantitative terms, imports from India rose from $1.23 billion in the 1998-99 (FY99) to $6.03 billion in FY14, while exports from Bangladesh to India have increased to $456.2 million from less than a meagre $60 million during the period.
Thus, Bangladesh's exports to India are far from reaching the $1 billion mark while bilateral trade deficit is a staggering $5.5 billion.
TRADE DEFICIT MISUNDERSTOOD: A populist notion in Bangladesh is that such a huge trade gap is very bad for the country.
Many people argue that given such highly asymmetrical trade balance with India, Bangladesh is losing valuable foreign currency. This type of argument needs to be reasoned out.
India is the closest neighbour of Bangladesh and around two-third of Bangladesh is surrounded by India which is also the second biggest import source of the country.
Due to geographical proximity and availability, many Bangladeshi industries are heavily reliant on capital machineries and raw material (especially intermediate materials) on India for domestic consumption as well as exports. For example, around 24 per cent of total import from India is cotton yarn and cotton fabrics.
Again, around 18 per cent of total import is cereals for domestic consumption. Demand for Indian goods, from consumer items to luxury products in Bangladesh, is also growing every year. This is a reality that fuels import.
 In this context it may be noted that import from China is much higher than India and so trade deficit with China is higher than India. In FY14, country's bilateral trade deficit with China surged to around $6.8 billion from $5.8 billion in FY13.
The United States of America had $4.6 billion trade deficit with Bangladesh in 2013, meaning that Bangladesh is enjoying huge trade surplus with the USA. Despite this, Bangladesh is seeking duty-free, quota-free market access to USA,
especially on readymade garments.
On an average, Bangladeshi products have to face 15.5 per cent tariff while entering the US market. The US government extracts four times more tariff on Bangladeshi imports than the United Kingdom.
Moreover, the country scraped moderate trade benefit two years back by suspending GSP facility although around 1 per cent of total Bangladeshi exports enjoyed this. Thus, trade surplus doesn't necessarily translate into trade advantage.
Trade deficit mounts primarily due to higher imports and lower exports with partner countries. Thus it needs to be analysed whether import is cost effective or cost saving and also the final usages of imports.
Cost of import from India is significantly low compared to many other countries like Turkey or Japan. It reduces time also. In fact, if both countries could reduce infrastructure hurdles, cost of import would have been much lower. Nevertheless, trade deficit cannot be ignored at all. Moreover Indo-Bangla trade gap is actually higher when informal trade is taken into consideration.
It is estimated that the volume of informal trade is around two times the current formal trade and informal import is very high compared to informal export due to the porous border.
NOT ONE WAY BARRIER: There are tons of allegations about trade barriers faced by Bangladeshi exporters while entering the Indian market. A good number of non-tariff barriers (NTBs) and non-tariff measures (NTMs) are there even after India provides tariff-free access for all Bangladeshi products except 25 product lines in 2011.
Interestingly, after getting the tariff-free access to Indian market in November 2011, Bangladesh's export dropped in FY12 by 5 per cent from FY11 when exports to India crossed $500 million mark for the first time.
Subsequently, exports surged by 15 per cent in FY13 but dropped again by around 18 per cent in FY14.
This goes to show that mere duty-free facility is not enough. More significantly, if duty exemption gets negated by non-tariff measures (NTMs) that eventually become trade distorting barriers, things cease to change for the exporting country.    Â
Generally, NTMs are policy measures that have the potential to affect the international trade in goods. For example, imposing quotas and prohibitions, or setting requirements for quality control, standards, packaging etc.
However, NTMs are sometimes used as an instrument to circumvent free-trade rules and to shield domestic industries from foreign competition. It is here that NTMs tend to become non-tariff barriers (NTBs).
Sometimes it is difficult to distinguish between legitimate NTMs from protectionist NTMs, as the same measure may be used for several purposes. Â
There is a long list of NTMs and NTBs like rigid testing requirements, delay in testing report delivery, sudden change in packaging and labelling requirements, Indian customs officials' discretionary power irrespective of rules.
Federation of Bangladesh Chambers of Commerce and Industries (FBCCI), country's apex trade body, in a recent report has identified several trade barriers.
These are: inadequate border infrastructure, local or provincial tariffs in India, poor logistics in land ports, cumbersome customs requirements, manual clearance system and lack of testing facilities close to the land ports on the Indian side.
These are not new at all. Consumer Unity & Trust Society (CUTS), a Jaipur-based international research organisation, in a study on Indo-Bangla trade mentioned that the cost of doing trade is high between India and Bangladesh due mainly to the lack of trade facilitation.
'Almost all border crossings lack in modern skilful infrastructure. Other NTBs like regulatory measures and lack of trade services have also resulted in hindering the bilateral trade,' the study report said.
It also found that if the NTBs and other technical barriers are removed from Bangladesh-India trade, both countries together stand to save a minimum of about 24.36 per cent of their current aggregate bilateral trade costs. The amount is about $1bn as per 2011 trade value, it mentioned.
In fact, poor infrastructure is a common problem and both sides have to suffer for this. Both Bangladeshi exporters and importers have to suffer when Bangladesh land ports fail to provide due service even after having far better facilities compared to the Indian land ports in most of the cases.
The CUTS study rightly pointed out, 'In terms of port infrastructure, Bangladesh land custom stations are reported to be better than India, particularly Benapole.
The reported reason is huge dependency of Bangladesh on Indian imports through Petrapole. Bangladesh has segregated facilities for different kinds of items, established huge warehouses and adequate parking facilities.
However, Benapole is reportedly the only land custom station on the Bangladesh side that has adequate infrastructure to handle the volume of trade between India and Bangladesh.
This is the primary reason why most of the trade (around 80 per cent) happens through this port.'
JOINT EFFORTS REQUIRED: Reducing, if not removing completely, the barriers to trade is a continuous process. The process could be faster with collaborative efforts reinforced by sincere intent to get into the crux of the problems towards resolving those.
Continuous efforts of
policymakers and businesses from both the countries are thus a must to make the flow of trade unhindered, less costly and beneficial for the consumers.
And, indeed, India needs to do more having comparative advantage to reduce bilateral trade barriers. Â
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